I sent an email to Caroline Baum today. She's a columnist for Bloomberg.com. (Bloomberg is notorious for their terribly misinformed economic "columnists" and Baum is a good example.)
I was responding to an article she wrote entitled, "Rear-View Mirror Can’t Forecast 2011 Economy."
In the article she attempts to argue that the 1.8% Q1 GDP growth was an aberration. According to her, one of the reasons why we should be getting ready for boom times is because (sigh), finally that darned, growth killing fiscal stimulus will soon end.
This is her "logic"...
| "Finally there are the waning effects of “fiscal stimulus,” or government spending by another name. Since one dollar can’t be spent by two entities at the same time, government spending can only substitute for private spending. Any resulting increase in GDP is temporary." |
So, being the masochist that I am, I decided to send Ms. Baum an email and ask her to clarify.
Here's how it went:
Me: "How does the “non-government” get the dollars to satisfy their tax liabilities or, to “net save” in that unit of account?"
(Sorry for the formatting. Baum writes in all CAPS, like an angry pwerson, so that's why the formatting is like this)
C. Baum : "I DON'T UNDERSTAND THE QUESTION BUT I SUSPECT YOU ARE ONE OF THOSE MMTERS."
Me: LOL!!! YOU RESPOND TO MY QUESTION WITH A SNARKY REMARK. OKAY.
SO, THE QUESTION SEEMS TO BE PRETTY SIMPLE. HOW DOES THE NON SOVEREIGN, I.E., THE PRIVATE SECTOR GET THE DOLLARS TO SATISFY THEIR TAX LIABILITIES? WHERE DO THEY GET THOSE FROM? IT HAS TO COME FROM SOMEWHERE? YOU SAY THE GOVERNMENT AND THE PEOPLE CANNOT SPEND THE "SAME DOLLAR." WHAT IN THE WORLD DOES THAT MEAN? DOES THE GOV'T HAVE TO GET BACK THE DOLLARS IT ISSUES IN ORDER TO BE ABLE TO SPEND? IS THAT WHAT YOU ARE SAYING?
C. Baum: I'M TALKING ABOUT BASTIAT'S BROKEN WINDOW. ACTUALLY AFTER BEING ATTACKED BY MOSLER FOR A SPELL, I FINALLY UNDERSTAND AFTER READING ROBERT MURPHY ON MISES YESTERDAY WHAT MMT IS ALL ABOUT. NOW IT REALLY MAKES NO SENSE. I DON'T NEED THE GOVT TO SPEND SO I CAN SAVE. THAT'S LUDICROUS. I CAN'T IMAGINE ANY SMART PERSON CAN THINK THAT. MAYBE YOU CAN ANSWER A QUESTION: WHY IS IT CALLED MMT SINCE IT'S ABOUT FISCAL POLICY.
Me: MOSLER ATTACK?? HARDLY. HE'S THE MOST RESPECTFUL AND POLITE PERSON I HAVE EVER MET. THAT "ATTACK" WAS YOUR OWN COGNITIVE DISSONANCE. (CREATES STRESS, INTERNAL CONFLICT. MAY HAVE CAUSED YOU TO PERCEIVE IT AS AN ATTACK.)
MURPHY'S PIECE MAY WELL DESCRIBE AN ECONOMY OF PRIVATE ACTORS WHERE THERE IS NOT AN AUTHORITY THAT IMPOSES A TAX THAT CAN ONLY BE PAID IN UNITS OF ITS OWN CURRENCY. IF A WORLD LIKE THAT EXISTS, PLEASE LET EVERYONE KNOW IN A NEW COLUMN. I CERTAINLY AM NOT AWARE OF ONE.
I BELIEVE THE TERM MMT CAME ABOUT FROM A BLOG POST BY SOMEONE BACK IN THE 1990S AND IT WAS NOT AN MMTER. (DON'T QUOTE ME.) HOWEVER IT CAME ABOUT, THE NAME STUCK.
C. Baum: MOSLER USED TO SEND ME NOTES AND SEND TO HIS ENTIRE DISTRIBUTION, SO THEN I HEARD FROM THEM. WHAT IS HIS MOTTO? THERE IS NO PROBLEM THAT CAN'T BE FIXED BY MORE GOVERNMENT SPENDING? C'MON.
Me: NO, THAT IS CERTAINLY NOT HIS MOTTO. YOUR STATEMENT SHOWS THAT YOU HAVE NOT EVEN TAKEN THE TIME TO INVESTIGATE MMT. YOU CRITICIZE IT WITHOUT EVEN UNDERSTANDING IT.
C. Baum: B/C THERE IS NOTHING TO UNDERSTAND BUT SOME ACCOUNTING TAUTOLOGY. I DID LOOK AT IT AT THE TIME. SO PLEASE DON'T ACCUSE ME.
MOSLER'S LAW: THERE IS NO FINANCIAL CRISIS SO DEEP THAT A SUFFICIENTLY LARGE TAX CUT OR SPENDING INCREASE CANNOT DEAL WITH IT.
THE GIST IS THE SAME
Me: THAT'S RIGHT, READ WHAT YOU WROTE:
YOU SAID THAT MOSLER STATES, "THERE IS NO PROBLEM THAT CAN'T BE FIXED BY GOVERNMENT SPENDING."
YET WHAT HE SAID (FROM THE ACTUAL QUOTE FROM HIS WEBSITE, WHICH YOU INCLUDED IN YOUR EMAIL TO ME) IS, "THERE IS NO FINANCIAL CRISIS SO DEEP THAT A SUFFICIENTLY LARGE TAX CUT OR SPENDING INCREASE CANNOT DEAL WITH."
TWO DIFFERENT THINGS.
ANYWAY, NICE CHATTING WITH YOU. GOOD BYE.
You get the "gist" of it. ;)
Oh yes, the "elites" are getting nervous now. We have entered their domain and one by one they are getting picked off. They've already lost Goldman, Morgan Stanley and the other smart ones among their ranks will soon become converts, too! Baum will certainly be among the last to turn, if ever.
They don't understand national accounting and it is impossible to do credible macro without it. They are getting caught with their pants down and they know it. No one like looking uninformed about the basics of their own field.
ReplyDeleteMMT'ers need to hammer home the accounting and show them that they don't know what they are talking about.
Mike,
ReplyDeleteA lot of people in the industry will be given the "Dan Rather Treatment" if MMT ever goes viral/mainstream, and I have to say it looks like it is gaining momentum.
Rupert may discard Neil like yesterdays newspaper for running an organization that missed this.
Mike I like Neil (and Charlie too at core), suggest you try to get some time with him. He cannot lose by doing ANY type of objective investigation/reporting. This topic is cutting edge in the new media.
Resp,
PS I have been getting some good results showing non-economists this post I did with the Roman currency found in Brittania..... perhaps flip this over to Baum.. help her snap out of it:
Link_http://mikenormaneconomics.blogspot.com/2011/04/who-did-roman-government-get-this-money.html
Mike,
ReplyDeleteAs an aside, do you get permission from your email correspondents to post their private emails? When I send an email to someone, although I recognize it may become public, I trust (until proven wrong) the other person will not be publishing our email exchange without my permission. Since I've seen you do this before, I have to assume either you have their permission of you simply assume you have the right to go public with it whether they approve or not.
Matt,
ReplyDeleteI don't see that happening anytime soon.
My Friday segment with Gasparino has been killed because I told the producer that I would no longer tolerate his "mocking" attitude.
When Charlie read my email he immediately responded that the segment should be "killed because if we can't have some good-natured fun it ain't worth it."
The producers immediately took him up on his suggestion.
Red Rock,
ReplyDeleteIf it was of a personal nature I would surely ask permission or not put it up at all, however, my conversation with Baum revolves around MMT and her criticisms of it. That's public. She writes about for public consumption.
Well, the confusion of Baum is actually not a surprise and harmless compared to what I read today in German FAZ.
ReplyDeleteThey interviewed Laurence Kotlikoff and now Germany knows the actual debt of the US federal government is a stunning 200 trillion US$.
This isn't Greece. This is I don't know what. It's really amazing what sort of idiots populate prestige universities in the US?
No wonder people are confused. What would really interest me is, would Kotlikoff tell Jan Hatzius in a discussion the same scare fairy tale?
OK. I guess I'm just different that way. Personally I wouldn't publish the contents of an email regardless of whether I thought it was personal or not without that person's permission. "Personal" is tough to accurately define.
ReplyDeletePersonal to me is anything having to do with that person's family, personal life, etc, or something said to me "off the record." Expressing her views on a subject that is being widely debated right now and which easily could have been argued in the comments section of a blog thread, does not seem to be an invasion of privacy.
ReplyDeleteStephan,
ReplyDeleteThat is very deceitful, but it's a deceit that debt mongers often like to use. They are talking about total liabilities extrapolated out 70 or more years. Notice they always give the liability side and not the asset/income side. That's like saying a newborn baby, the minute it is born, has a debt of $500,000. (Ultimately, the purchase of a home, several cars, perhaps, college education for its children, down the road, etc.) What they don't tell you is what the baby will earn over the course of its life; the assets it will accumulate in excess of the debt (its wealth); whether its earnings will be able to service its debt, etc. Moreover, they describe a sovereign government, indebted in its own currency, which makes the distortion all the more egregious.
Ill throw out a related tangent on people having a hard time understanding MMT:
ReplyDeleteI am curious if any MMTers have taken the Myers-Briggs Type Indicator test and if so, how they rated on the Sensing/Intuitive scale?
From my understanding, ~80% of people fall more on the sensing side of that scale. I fall on the intuitive and I suspect people falling on the intuitive side might be more easily able to grasp MMT, since they tend to understand abstract and theoretical ideas more aptly than sensing types. For example from wikipedia:
“Sensing and intuition are the information-gathering (perceiving) functions. They describe how new information is understood and interpreted. Individuals who prefer sensing are more likely to trust information that is in the present, tangible and concrete: that is, information that can be understood by the five senses. They tend to distrust hunches, which seem to come "out of nowhere."[1]:2 They prefer to look for details and facts. For them, the meaning is in the data. On the other hand, those who prefer intuition tend to trust information that is more abstract or theoretical, that can be associated with other information (either remembered or discovered by seeking a wider context or pattern). They may be more interested in future possibilities. They tend to trust those flashes of insight that seem to bubble up from the unconscious mind. The meaning is in how the data relates to the pattern or theory.”
How about listing all the deficit terrorist who made major anti-keynes and anti-mmt statements since 2007 and start there one by one.
ReplyDeleteFor example, the German Finance minister who blurted the "crass USA keynesian economics" rubbish.
Where is he ? Didn't all his banks accept TARP money AND open swap lines with the US Fed reserve ?
Germany sweeps to export history this money all underwritten by the "taxpayer" in the USA.
Germany sweeps the Euro up and down depending on the time of year :
Lower the Euro by using Greece as it's excuse to increase exports, and raise the Euro when it's necessary to pay off foreign debts for necessary inputs.
Germany is engaging in currency manipulation just like the rest of the keynesians.
Like most newspaper columnists & ignorant politicans who have no education in empirical evidence/real science, Caroline Baum majored in Politicial Science & a masters in Cinema Studies (ya, she can b.s. about movies & political movements like the Tea Party, LOL)
ReplyDeleteFunny that she claims to "FINALLY UNDERSTAND (MMT) AFTER READING ROBERT MURPHY ON MISES".
ReplyDeleteMurphy's logic was incredibly flimsy. He actually wrote the following in a footnote:
"Note too that Google's lack of a printing press isn't relevant for the establishment of the accounting tautologies. The MMTers' sectoral equations are true whether the government has a fiat currency or gold commodity money."
So MMT is irrelevant because you can substitute Google for government in an accounting identity. Unbelievable that Caroline Baum finds such logic persuasive...
CRAKE, I took that test in 98 long before discovering MMT and had it done properly - not with all these net based ones. At the time I was INFP if that helps your theory
ReplyDeleteCrake,
ReplyDeleteI'm and 'I'. Ive observed what may be another common denominator, that is Mathematical Maturity.
Many in/around MMT seems to have had some immersion in a heavy college level math curriculum. Mike I think once said he did a Math minor at Penn, Warren I believe spent 2 yrs undergrad in Engineering, Bill Mitchell I believe said he came to econ from a math major... heavy doses of math (calculus, etc..).
The wiki link posits that the heavy math somehow leads to the ability for critical thinking. I believe Tom here took the path to a true ability for critical thinking via PhD in Philosophy, so apparently there can be many paths to being able to understand and/or "see" MMT, but it looks like Cinema isnt one of them.
Ms. Baum is going to have to really bear down to be able to intuitively see MMT. But I think it can be taught to anyone as long as they honestly want to understand it...
Resp,
Mike.
ReplyDeletemaybe charlie was the wrong guy for that segment... what about stuart varney?
Maybe leave the boble heads out and you and Varney could have a true economic debate.... perhaps a bit more (as Krugman says) "wonkish" but still challenging and entertaining...
Just some ideas... I liked the concept but I never saw Charlie as being intellectually able to make it anything but a silly segment once you started to confront him with actual economics theories and identities and such.... he couldnt hang at that point and resorted to frat house tactics, F-bombs, etc...
I think you did the right thing, but I hope they can get someone else only this time with some academic economic gravitas so sit across from you...
Resp,
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ReplyDelete