Brave New World
Jeffrey D. Sachs – The New Geopolitics
An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
Well, things are getting interesting in the US. The Federal Reserve started hiking interest rates in April 2022 and its decisions are underpinned by an theoretical framework that suggests the unemployment rate is below what it thinks is the natural rate (the rate where inflation is stable). So the rate hikes are meant to slow spending and increase the unemployment rate and cause price setters to stop accelerating prices up. Except the data isn’t obeying the theory and inflation is falling despite the rate hikes rather than because of them. This is another demonstration of how flawed the dominant mainstream economics has become. Last Friday (January 3, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – January 2023 – which revealed on-going and very robust employment growth, rising participation and falling unemployment. These are good signs for American workers. Further, as inflation is now in decline, most sectors recorded both modest nominal wages growth is some real wages growth – another virtuous sign. The latest data is certainly not consistent with the Federal Reserve type narratives. The point is that the labour market is not behaving at all like the assumed model deployed by the Federal Reserve....Bill Mitchell – billy blog
MNE dispatched its roving reporter to the Atlantic coast today to cover the shoot down of the China spy balloon here is the footage:
Our reporter on the scene heard 2 explosions… This may have been an initial miss:
Then this might have been the hit:
1 points to the China spy balloon and might be the location of the hit … 2 might be the area of an initial miss… and 3 is the interceptor aircraft exiting the space to the south…
MNE can report we last saw it deflated and falling slowly towards the ocean right off South Carolina coast…hopefully the US Navy can fish it out and we can figure out what it was doing…
Over the past century, the theory that rational behavior involves maximization of utility has become central to Economic theory. In economics, this theory is established on axiomatic grounds, and supported by intuitions and speculations. However, When psychologists examined this theory of behavior by carrying out actual experiments on human behavior, they found that the theory leads to wrong predictions in many examples. By now, an overwhelming amount of evidence has emerged to show the strong conflict between economic theories of human behavior and actual behavior; a survey of is given in “Empirical Evidence Against Neoclassical Utility Theory: A Survey of the Literature,” This post provides the details of this conflict in one example taken from the paper, where four major predictions of economic theory are all in direct conflict with the experimental evidence.…
Hockett: The budget is its own debt ceiling.…Kake News
We don't need gimmick vs. gimmick when we have budget law
WOLF: What about the other ideas to get past the debt ceiling? Trillion dollar coins and such?
HOCKETT: The wonderful thing from my point of view here is we don't need any of those gimmicks. We just have a little garden-variety budget law on our side, and so we don't really have to resort to anything kind of unusual or surprising or gimmicky..…
Nice troll of the dumb ZH monetarists…
Revolver people:
It is the empirical fact of apparently lucrative borrowing in one’s own currency over the last thirty years that underlies the Biden administration’s confident experiments in fiscal irresponsibility. If you talk to intelligent economists who endorse “Modern Monetary Theory,” you often find that it boils down to the above fact and does not contribute a single new insight that would justify the Biden administration’s recent fiscal choices. Nonetheless, unemployment is falling, real wages are only falling slowly, and the U.S. appears in no risk of a depreciation-driven debt crisis).
Sorry Zero Hedge, For Better or Worse the US Dollar Will Remain the King of Currencieshttps://t.co/zTB9HgqKPa
— Darren J. Beattie 🌐 (@DarrenJBeattie) February 2, 2023
This week, the British Broadcasting Commission (BBC) released the results of an independent review into its coverage of economic matters – Review of the impartiality of BBC coverage of taxation, public spending, government borrowing and debt – which was completed in November 2022. The problem is that the Investigation conducted by this Review, while interesting and providing some good analysis, misses the overall source of the bias that our public broadcasters have fallen into. The problem is not that they might be favouring political positions of one party or another. Rather, the implicit framing and language they use to discuss economic matters is largely flawed itself. And the journalists who uncritically use these concepts and terms just perpetuate the fiction and mislead their audiences....Bill Mitchell – billy blog
To my mind, issuing consols as JP Koning suggests is the simple solution and to be preferred over the coin, which has no precedent and appears gimmicky. In addition, he points out that consols fir with existing Fed policy and operations whereas the coin does not.
However, my preferred solution would be for the president to order the treasury secretary to ignore the debt ceiling as contradicting previous legislation without repealing it. Then there is also the Fourteenth Amendment.
Short and worth a read in full.
MoneynessSo the IMF has come late to the transitory inflation party. What was obvious months ago is now at the forefront of IMF forecasts. Better late than never I suppose. It is becoming clear that most indicators are still not predicting a major demand-side collapse in most nations. Growth has moderated slightly and the forward indicators are looking up. At the same time, the inflation data around the world is suggesting the price pressures have peaked and lower inflation rates are expected. Real wages continue to fall, which means that the inflationary pressures were not being driven by wages. So no wage-price spiral mechanism at play. And PMI data and related indicators (such as shipping costs, etc) suggest the supply constraints which drove the inflationary pressures are easing. So has all this been the work of the interest rate rises imposed on nations by central bankers (bar Japan)? Not likely. The rising interest rates and falling inflation are coincidental rather than causal. Which means the damage to low income debt holders and the bank profits boom from the higher rates was for what?...
“As the sole issuer of euro-denominated central bank money, the Eurosystem will always be able to generate additional liquidity as needed,” Lagarde said in response to a question by an Italian member of the European Parliament.
“So, by the definition, it will neither go bankrupt nor run out of money. In addition to that, any financial losses, should they occur, would not impair our ability to seek and maintain price stability....
In a mirror image of what the United States has been doing with semiconductor lithography technology, China has recently amended its rules to ban the export of several core solar panel technologies in order to maintain its leading status and global market share in the sector.Asia Times
A solar panel on a rooftop may include a hundred pieces of silicon and China has the lead now in machinery to manufacture those. Now Chinese manufacturers have been forbidden to use their large silicon, black silicon and cast-mono silicon technologies overseas, according to the newly-amended export guidelines published by the Ministry of Commerce and the Ministry of Science and Technology.
I can object all I want, but our computer will be right and we are looking at World War III between 2025 and 2027. So batten down the hatches.
Our computer, which tracks the global capital flows thanks to the cooperation with raw data, we can see that the money is still migrating out of Europe. Russians and the Chinese are pulling money out of Europe as well. So far, it is still underpinning the US marketplace.
NATO’s top military spokesman called Saturday for members of the US-led military alliance to transition to a “wartime economy” in order to “increase the production in the defense industry.”
In the interview, aired Friday on Portugal’s public broadcaster RTP News, Rob Bauer, Chairman of NATO's Military Committee, said the US-led NATO alliance is prepared for a “direct clash with Russia.”
Revealing mindset. The military mind is a thing of its own. In addition, Western leaders seem to have watched Patton (the movie) too many times.
Neither the remarks of Bauer and Nuland nor the Rand report cited above have been reported on the front pages of any major US newspapers, or cited on the evening news. While US and NATO officials are openly talking about a direct conflict with Russia and China, the public is not being notified about the extraordinarily dangerous and reckless escalation of the war that is taking place.WSWS
The problems that economists encounter when trying to predict the future really underline how important it is for social sciences to incorporate Keynes’s far-reaching and incisive analysis of induction and evidential weight in his seminal A Treatise on Probability (1921)....Lars P. Syll’s Blog
I am certainly not the first person to point to wartime mobilization as a model for our response to climate change. Alexandria Ocasio-Cortez made headlines3 for it within politics, but academics such as JW Mason, Andrew Bossie, and Isabella Weber have also worked to extract lessons from World War II for today.4 In my research I zero in on the Treasury, a key nexus of macroeconomic policymaking, and compare and contrast their view specifically with that of MMT.Of course, the MMT economists noticed this too.
The method is historical: I dug through various sources, primary and secondary, to piece together the worldview held by Treasury officials. The result is a surprisingly long list of direct quotations that you could easily mistake for having come from an MMT economist.…
Iran and Russia have linked their banking systems, a senior Iranian official said on Monday, a move that will allow the two heavily sanctioned countries with deepening economic ties to trade and conduct business outside the US financial system.
The two connected their interbank communication and transfer systems. Since the 2018 reimposition of sanctions, Iran has been disconnected from the western-based Swift financial messaging system, while many Russian banks were kicked off the platform following Moscow’s invasion of Ukraine.
"Iranian banks no longer need to use SWIFT ... with Russian banks, which can be for the opening of Letters of Credit and transfers or warranties," deputy governor of Iran's Central Bank, Mohsen Karimi, told the semi-official Fars news agency.…
Let's stop the finger-pointing and have an honest conversation. Neither side is responsible for our debt crisis, because there isn't one....
Substantial post.
The LensOf course, a wealth tax would raise money. But the government does not need money: it can print as much of it as you want. It needs real resources: nurses, care-workers, builders, quality managers and so on.Stumbling and Mumbling
Lula's visit to Argentina, during the Community of Latin American and Caribbean States (CELAC) meeting, brought about a brief discussion of the possibility of a common currency. I have discussed here (as well as many guest bloggers) both currency unions, in particular the euro, and it's consequences. Note that the FT piece linked suggested that the common currency was the first step in a long process. I doubt it, in part because, if the end goal is a real currency union, it would be a terrible idea. The actual proposal by the current finance minister, Fernando Haddad, and one of his collaborators, Gabriel Galípolo, falls short of a common currency area. It is still a bad idea....
In my view, the point of this announcement was purely political, and to suggest that the integration between the two countries, one with a threatened economy [Argentina], the other with a threatened democracy [Brazil], is a priority. Both left of center presidents stand together.… There is no circumstance in which a movement in the direction of a common currency makes any sense.Naked Keynesianism — Hemlock for economics students
Alex Williams recently wrote “What Is ‘Core PCE Services Ex-Housing’ Anyway?,” which dissects the measure that the Fed is using to get a handle on “underlying” inflation. The most interesting bit (for me) is that about 1/4 of this measure is an imputed price index, based on wages. This means that this component will track wages (giving a convenient analytical relationship) by definition.Bond Economics
The logic of following this measure is that the Fed convinced itself that the core (ex-food and and energy) personal consumption expenditure is the best measure of “underlying” inflation, but it turns out that the housing part of that has construction issues (too smoothed to pick up current events), and so they wanted to strip that out of the measure.
This measure is obviously problematic. Its use reflects intellectual herding: following the methodologies of previous academics, without stopping to ask basic “why are we doing this?” questions. This is a typical feature of areas of academic failure. Since it is impossible to come up with useful results, the “publish or perish” imperative means that what gets published are marginal changes to an existing literature that has serious defects. (Source for that assertion: what I saw in my career in academia.)...
Britain is now in a very undesirable state. The governing Tories are bereft of any sensible ideas and likely to lose the next General election in 2024 to Labour, who are promising to be the party of ‘sound finance’, which means they will be incapable of dealing with the challenges that face the nation in a highly volatile world and will likely end up losing popularity and ceding government back to the Tories. And just as in 2010, the Labour reputation will tarnished and they will be lost again for another sequence of elections. That sort of future prospect is not inspiring is it. Caught between a rock and a hard place.Bill Mitchell – billy blog