Stephanie Kelton kills it on Capital Account.
I was chuckling when Lyster said to her, "There are some out there who think that the government should spend until the nation is at full employment..."
That was a reference to me. LOL!!!
Tuesday, December 11, 2012
Stephanie Kelton on Modern Monetary Theory's Goals for Full Employment a...
Subscribe to:
Post Comments (Atom)
67 comments:
yes killed it Mike... and she was politically balanced in her presentation which is a very smart move... this political balance has perhaps been missing... and can work to turn things right around on the GOP on tax cuts...
Great job by SK and Lauren looks like she might be engaging in earnest which is good too..
Great job breaking the ice over at the RT for MMT Mike...
rsp,
Does the book by Stephanies left ear class as product placement? think someone sorted the bookshelf..nice one :)
The comments on YouTube are off to the typical disappointing start with morons failing to or not caring to understand/think/listen.
Stephanie is developing a face for MMT...a Krugman-type presence (yeah, I know there's a long way to go still) that appears to be building quickly.
MMT seems to be gaining momentum. It will be interesting to we what strategy the neo-liberals employ to try to maintain their strangle-hold.
It will be interesting to see if logic and the track record of getting things right will break through all the myths we have absorbed over the years.
Cris R:
Yes, same ignorant comments, but less vile than those aimed at me.
Demetri Kofinas, if you're listening, I know how much you love debates between your hero, Schiff, and other people. I turned you down several times. Now go get Stephanie. I'm sure she'll do it.
"The comments on YouTube are off to the typical disappointing start with morons failing to or not caring to understand/think/listen" - Cris R
"First they ignore you, then they ridicule you, then they fight you, then you win". - Mahatma Gandhi.
"...a Krugman-type presence (yeah, I know there's a long way to go still)..."
Yes, she'll have to grow a beard.
(Sorry, couldn't help myself.)
Lol!!!
He's your lover?
"Lauren didn't make "ignorant comments."
"Isn't it wonderful that nature does a better job at regulating our money supply than the central planners." -Lauren Lyster
You're right, Demitri. That was truly brilliant!
And one final comment...I was NEVER in your newsroom. Your newsroom is in Washington D.C. I was always on remote in NYC and the time I screamed at the simpleton, Denninger, when I came out of the studio the staff over there gave me an ovation, FYI.
btw...it spelled "height," not "hight."
I am a stickler for proper spelling and grammar.
"First they unfriend you, then they LOL, then they flame you, then you turn the comments section off." mkgandhi1869
"Isn't it wonderful that nature does a better job at regulating our money supply than the central planners."
ok, im trying to understand this whole MMT thing, so what would the MMT arguement be that central planners are better at regulating money supply than the voluntary marketplace when someone says before the federal reserve central bank the value of the dollar gained 8% and after 1913 the value of the dollar lost 97% and prices have increased by 2,260%?
i get that prices rise as wealth is created, but is there not a difference between wealth being created through production and 'wealth' that is created through a printing press?
and one last problem i'm having understanding the MMT position is on inflation, i understand that inflation can benefit the debter when paying back a lender in depreciated dollars...but doesnt that always work both ways, does is also not steal wealth from the saver in purchasing power? what of people on fixed incomes that experience no new money but only higher prices as we see today with elderly and unemployed? what of the corporations and politically connected that get the new money first and are able to spend it before prices have yet risen, is that not an unfair advantage to the wealthy? if money is nothing more than a medium of exchange, than how does printing it increase real wealth at all?
and thats just the tip of the iceburg... i did enjoy the interview posted here though.
Daniel, please read Warren Mosler's The 7 Deadly Innocent Frauds of Economic Policy. It explains where we are coming from.
Here is my very short summary of the main concept.
• A monetarily sovereign government as monopoly currency issuer has the sole prerogative and corresponding sole responsibility to provide the correct amount of currency to balance spending power (nominal aggregate demand) and goods for sale (real output capacity). If the government issues currency (nongovernment net financial assets) in an amount that results in effective demand in excess of productive potential to expand capacity to meet it, demand-side inflation will occur due to demand exceeding supply. Conversely, if the government falls short in maintaining this balance, so that supply exceeds demand and inventories build up, recession and unemployment result due to insufficient demand relative to supply (like now). See Bill Mitchell, Modern monetary theory and inflation – Part 1
(There is also supply-side inflation resulting from supply shortages of vital materials like petroleum, or a shock like war. See Bill Mitchell, Modern monetary theory and inflation – Part 2.)
"Isn't it wonderful that nature does a better job at regulating our money supply than the central planners." -Lauren Lyster
What Lauren Lyster actually said:
Which is so incredible that mother nature and good old supply and demand is much more effective FOR PURCHASING POWER IT WOULD SEEM AND VALUE than central planners. Is that the big takeaway here?
I've been lectured at least 30 times on this stupid site that we cannot have a gold and silver based money supply BECAUSE GOLD AND SILVER WILL SLOWLY INCREASE IN VALUE, which will cause everyone to hoard and no one will invest.
What Lauren Lyster said was absolutely correct. Gold and silver will maintain their value over time. Except you MMT cement-heads claim that is a bad thing.
Given what is now happening in Europe, I don't see why any country would want to peg its currency to a form of money they don't control.
you didnt answer any of my specific questions...
Mike,
i do not think you should be afraid of wacko's comments and delete them. There is no issue with getting them to persuade anyone who understands MMT, but it surves the good purpose of deconstructing their fallacy and many readers not acknowleged in MMT read and can expand their thinking by our succesfull arguments. Unless they are venal and personaly insulting i do not fear anyones arguments no matter how illogical might be or are.
So, please do not delete comments.
And if you do, you should not respond to them since we can not know what you responded to.
Thanks
Daniel
If i may answer with a question.
Why do you value the value of dollar? What it is important for?
As long as it is not a fast, radical change in value, why does it matter how much it changed over time? Not radical change i take is under 10%.
"but is there not a difference between wealth being created through production and 'wealth' that is created through a printing press?"
I do not think that anyone in MMT is claiming that wealth is created directly trough printing press, only indirectly, by enabling wealth exchanges to take place.
Money is also a mean for exchange, accounting mean, to know how much someone has for exchange. Printing press only enables wealth exchanges.
YOu take value of money as wealth. Only wealth is real stuff, not paper the money is printed on. To prove it, let me ask you How wealthy you are on deserted island with billion dollars in your pocket and you have no communication to order stuff from mainland. If there is no mean to exchange that accounting wealth, you are not wealthy at all.
Please do not forget that when you say that printing press creates wealth.
If you treat money as a mean for exchange then you can see that printing money enables exchange that would not happen otherwise in producing and organising exchanges of real stuff, because that is what is important, exchanging real stuff, products and services. Value of the money is not important on its own, and please do not fetishize.
What is the value of Bilion dollars that you accumulated but you did not spend before you died? is there any value in it to you, if you did not use it, except psychological (thinking that you are rich now and you do not have to worry). If it is only psycological value of accumulated money, why do you always have to confuse it with real terms?
MMT helps with understanding of what is real and what is not, and you will not get it unless you keep real terms separated from nominal terms all the way trough process of thinking.
If you switch from real terms to nominal terms on one element of thinking and not notice the switch you made, you will get wrong conclusion.
Money is only nominal, products and services are real, from begining to the end of logical thinking. DO it and you will come to the only conclusion possible: MMT
Bob
"What Lauren Lyster said was absolutely correct."
You should prove it first that mother nature trough supply and demand (i think that is what you meant) has anything to do with creating value in purchasing power, do not just believe what someone else said.
Can you go shoping with gold and silver in your pocket? YOu have to exchange it first for money, and exchange that money for real goods and services. If you have no means to exchange it for real value, what is the value of gold and silver?
See above comment.
I think you place real value on gold and silver on psychological value for possesing something. Value of gold and silver is 0 if you have no means to exchange it for real stuff, unless you can build something with gold and silver that you can use. Only what you can use have real value.
Gold and money has only nominal value. In accounting.
Please, do not confuse those two terms.
Friedrich Hayek:
"we must free ourselves from what is a widespread but basically wrong belief. Under the Gold Standard, or any other metallic standard, the value of money is not really derived from gold. The fact is, that the necessity of redeeming the money they issue in gold, places upon the issuers a discipline which forces them to control the quantity of money in an appropriate manner; I think it is quite as legitimate to say that under a gold standard it is the demand of gold for monetary purposes which determines that value of gold"
"it is an erroneous belief that the value of gold or any metallic basis determines directly the value of the money"
"I do believe that if today all the legal obstacles were removed which prevent such an issue of private money under distinct names, in the first instance indeed, as all of you would expect, people would from their own experience be led to rush for the only thing they know and understand, and start using gold. But this very fact would after a while make it very doubtful whether gold was for the purpose of money really a good standard. It would turn out to be a very good investment, for the reason that because of the increased demand for gold the value of gold would go up; but that very fact would make it very unsuitable as money. You do not want to incur debts in terms of a unit which constantly goes up in value as it would in this case, so people would begin to look for another kind of money: if they were free to choose the money, in terms of which they kept their books, made their calculations, incurred debts or lent money, they would prefer a standard which remains stable in purchasing power."
http://mises.org/daily/3204
"i get that prices rise as wealth is created, but is there not a difference between wealth being created through production and 'wealth' that is created through a printing press?" - Daniel Jones
First, wealth is created as a result of spending…spending creates demand from which production springs to capture the spending.
Spending is measured in dollars and every dollar in existence was created at the pleasure of the government.
Second, the main spending agent is the Federal Government, which accounts for 30% of GDP out of the gate and with a multiplier accounts for almost all of GDP. See "chum".
Finally, deficit spending funds profits…last time I checked profits were measured as an increase in net dollars on balance sheets…those net dollars have to come from somewhere.
I think that should be one of the fundamental rules of economics…everything has to come from somewhere…in a closed system nothing new can be created…only changed in form.
P.S.
Business cannot succeed mathematically without the government hiring part of the workforce and purchasing a significant amount of production…that's how it gets the money flowing and also increases the volume.
Businesses individually or in the aggregate cannot succeed on sales to it's own employees…where does the extra funding come from?
"where does the extra funding come from?"
gold mines? j/k
Daniel,
"after 1913 the value of the dollar lost 97%"
Another view:
"what do they mean, when they say the dollar lost 95.1% of its value in those 93 years? Essentially, an average good/service that cost $1 in 2006, used to be priced at 4.9 cents in 1913. In other words, the average price level of goods/services increased by 1930% since 1913. True, but guess what, average earned income increased by 6560% during the same time period. Average earned income rose from $740/yr in 1913 to $49,300/yr in 2006. Adjusting for inflation, $740/yr in 1913 is $15,000/yr in 2006 dollars. Average incomes, not only kept pace, but beat price inflation by 230%."
http://realfactbias.blogspot.co.uk/2012/02/no-dollar-did-not-really-lose-95-of-its.html
Paul,
"Spending is measured in dollars and every dollar in existence was created at the pleasure of the government."
I know what you mean but it helps to clarify that most of the money in existence is bank credit, that banks create credit endogenously by making loans, and that most of the spending in the economy is done with bank credit.
"what of the corporations and politically connected that get the new money first and are able to spend it before prices have yet risen, is that not an unfair advantage to the wealthy?"
cantillon effects:
http://socialdemocracy21stcentury.blogspot.co.uk/2011/09/are-cantillon-effects-argument-against.html
http://uneasymoney.com/2012/12/06/those-dreaded-cantillon-effects/
y, paul
If you are trying to persuade someone, it is easier to attack only the points that are at the begining of the confussion. Trying to cover the whole theory and everything that includes it would confuse main points of discussion.
Example:" but is there not a difference between wealth being created through production and 'wealth' that is created through a printing press?"
In this statement it is clear that confussion comes from conflating real and nominal value. only way this sentence hold truth is if nominal value in every condition and every case represent real value. But we know that is not true, question is do they know?
I try to keep parameters of discussion only on earliest mistakes in logic and using their terms to make it more comprehensible.
All encompasing theory can come later after the early confusion is corrected.
Unless we get over early wrong assumptions, discussion on further points is futile and it will return to initial assumption always.
"I know what you mean but it helps to clarify that most of the money in existence is bank credit, that banks create credit endogenously by making loans, and that most of the spending in the economy is done with bank credit." - y
y, I think you are misunderstanding how credit fit's into the system and are putting too much emphasis on the ratio of credit spending to NFA. This is simply leverage and it has a functional limit. None of the points I made in my comment depends upon credit, at least not consumer credit.
The level of credit spending is a direct function of fiscal spending, it is spending in anticipation of future income, and is a function of the level of NFA in the system.
Net spending is required for the economy to grow…it is a necessary condition.
Credit is a leveraging tool that cannot do much of anything operating alone (except get folks hopelessly in debt and crashing the economy).
Credit leverages NFA, so of course there is a lot more credit money in existence than NFA, the ratio is about 4.5 to 1 vs NFA and 34 to 1 vs net currency.
The ratio of consumer credit to NFA is only about 1.1 to 1 currently but has been as high as 1.9 to 1. We know how that high leverage affected the economy.
"In this statement it is clear that confussion comes from conflating real and nominal value." - Jure Jordan
Jure, that is true and it is very common, virtually everyone does it, it requires discipline to keep them separate.
Seems to me the distinction between real wealth and nominal wealth is an important one but it isn't what drives the system.
At the end of the day, wealth is a function of NFA, so I prefer to approach it from that angle. I am trying to make the point that our (everyone's) economic system under capitalism is dependent on government spending, not investment decisions by business.
Government spending may not be a sufficient condition for economic success, that takes coordination and planning on a massive scale, but it is the necessary condition.
That's pretty much my message (which is subject to the tyranny of the arithmetic), I repeat it over and over again in different ways.
We can attack ignorance from many directions.
paul
no dissagrement here on your MMT logic, i am talking only about process of teaching, persuading someone to comprehend your view.
I am trying to say that you should not teach advanced courses to someone who did not pass begginers course.
Jure, I agree. I wasn't necessarily trying to convince Mr. Jones of anything, I was of trolling for disagreement.
That's my way of getting a discussion started. :-)
Maybe I should try to present the ideas in a post rather than the comment section, but I generally like to get a little feedback first.
Oh, and a postscript…
"no dissagrement here on your MMT logic"
The only part of my logic that is MMT is the implied use of sectoral balances…everything else is based on system arithmetic.
paul
" economic system under capitalism is dependent on government spending, not investment decisions by business."
I would say "dependent on government spending and government specified tax regime"
Tax regime also rewards and punishes economic flow.
you didnt answer any of my specific questions...
You haven't taken the time to read the basics of MMT as suggested. Do you think that you are the only person that comes around here and asks questions that have been answered already in the literature? Why should we take time going through this ad nauseam?
"Tax regime also rewards and punishes economic flow" - Jure Jordan
I would say taxes affect the stock of NFA more than the flow. How taxes affect flow is difficult to quantify.
Spending affects the flow.
Net spending affects both the flow and the stock.
I should have said "much of" instead of "most of". My error.
"Credit is a leveraging tool that cannot do much of anything operating alone (except get folks hopelessly in debt and crashing the economy)."
The 19th century was a series of booms and crashes, growth spurts and recessions, much of it fueled by bank credit.
I'm pretty certain Keen used to believe that it's (theoretically) possible for a private credit economy to sustain itself without all that booming and crashing. I'm not sure what he thinks about that now.
paul
You are thinking of money flow and money stock, i meant economic flow, which also includes trading goods and services flow and with it investment decisions.
"I should have said "much of" instead of "most of". My error." - y
I don't think that's an error…it was a true statement.
I think it was only missing context. There are essentially two classes of private debt, household and business. Business debt can be further broken down into financial and non-financial, but for the time being let's leave that alone.
If you look at household debt, you will see that it doesn't leverage NFA very far, it's barely above 1 to 1. That's because household debt is a proxy for income and by extendsion savings…it is temporary money and it must eventually be made permanent by zeroing it out.
Households have to repay their debts and the money can only come from net government spending. Borrowing more money doesn't extinguish existing debt…it adds-to, with an incremental increase in spending accompanied by an incremental increase in liabilities.
Household spending also repays business debt because that debt is rolled into the cost of products and services.
Business debt is necessary (for most businesses, Apple not included) to finance investment, which can take years to recoup.
The reason there is so much bank money relative to net money is not obvious, and easily misinterpreted.
Business debt is not the problem. Financial debt is another story. It's growing much faster than the other classes of debt and we aren't keeping up with deficits, so financial businesses are stripping whatever wealth we have in a sort of zero-sum scam…they win, everyone else loses.
They have to be stopped.
"I'm pretty certain Keen used to believe that it's (theoretically) possible for a private credit economy to sustain itself without all that booming and crashing. I'm not sure what he thinks about that now." - y
Yeah, I've been wondering about that too lately.
Based on my understanding of closed sytems and conservation principles, it is impossible and the arithmetic is very simple, MMT has already done that math.
When time enters into the picture and the ability to expand credit leveraged on value, etc. it appears that the system can "bootstrap" itself and grow without expansion of the money supply…
…except then the closed-system arithmetic fails.
I've tried doing the math necessary to show that a credit-based system is impossible, but I had no success…too complicated.
So I've fallen back to a different approach…
Keen can't model the existing system because the system has always had deficit spending. How would he extract that from his model?
I decided to look at FRED data and look at the various relationships empirically.
I'm convinced the verdict is in and it follows the closed-system rules as expected.
I suppose I will have to put together a post that demonstrates my argument and then you guys can pick it apart. :-)
Daniel
" what of people on fixed incomes that experience no new money but only higher prices as we see today with elderly and unemployed?"
Why did you assume that fixed incomes are not raised for inflation?
Don't you know that SS is raised every year adjusted for CPI?
Don't you know that 401k is comparable to adjustment for CPI, just by shear inflation of the stocks not only by improved p/e ratio.
If you average all private retirement savings they are just bellow income from investing in Tsys. ANd Galveston,TX which is exempted from participating in SS has just a bit better results then SS thanks to higher rise in population then rest of the USA. SO even them are adjusted for CPI.
I really do not know where could you get the idea that fixed incomes do not get more money with inflation.
"paul
You are thinking of money flow and money stock, i meant economic flow, which also includes trading goods and services flow and with it investment decisions." - Jure Jordan
Yes, I limit my discussions to the flow of money…everything else follows from that, so why make arguments in a roundabout or indirect way?
In the majority it of discussions with non-believers in MMT (and some believers) the division between real and nominal becomes blurred and confusion results. The seem to think that growth in real wealth can somehow create net dollars. It can't. I learned that in engineering school 40+ years ago and it has served me well.
Nothing meaningful can happen on the scale that we need it without a functioning and well-managed monetary system.
I tend to ignore second-order or dependent variables for obvious reasons. That's just my approach. YMMV.
paul
"Households have to repay their debts and the money can only come from net government spending"
yeah, but do you take into account expansion of debt? It is additional spending and should be included into calculation of money stock change.
Expansion of credit in 2006 was $4T. I know that it goes mostly into inflating financial assets only, but it does trickle down true more retirement value.
I mean, there is a reason that expansion of debt is correlated and causual of economic expansion and contraction.
Even tough it inflates finacial assets, but that is still calculated in GDP. GDP is accounting matter that tries to reflect real production. GDP goes up with inflation.
Government spending affects (not imediately) credit expansion and both affect economic system.
Steve Keen did a great job on that.
The seem to think that growth in real wealth can somehow create net dollars. It can't.
Right, it's the other way around. Economically, this is the sole purpose of money from the macro standpoint. The "trick" is managing growth (capital accumulation and production & productivity increases), full employment (job offer at a living wage for all willing and able to work), and price stability. With good management, these coalesce around an optimal rate of real wealth creation. If that is not happening, look to the management.
"yeah, but do you take into account expansion of debt? It is additional spending and should be included into calculation of money stock change." - Jure Jordan
Jure, I accounted for it in my comments above in detail.
The additional spending adds zero to the persistent money stock, and is cancelled down the road by lost spending in an equal amount. Further, down the road the debt can't be repaid if the government doesn't net spend by a sufficient amount.
Debt expansion closely tracks NFA expansion.
In my view the permanent money stock, NFA, is the most important metric of the "money" supply. The credit money supply mainly tells us how much risk is being taken.
"Expansion of credit in 2006 was $4T. I know that it goes mostly into inflating financial assets only, but it does trickle down true more retirement value." - Jure Jordan
It can't trickle down in a greater amount than what the government net spends. In the absence of net spending debt merely transfers assets from one part of the economy to another. Retirement funds are vapor if not monetized by net money creation. Where do the funds come from?
"It is impossible for an effect to be stronger than its cause" -(Aquinas, 1274)
"there is a reason that expansion of debt is correlated and causual of economic expansion and contraction" - Jure Jordan
Debt does correlate but debt is a dependent variable…dependent upon net financial asset expansion.
You are focusing on the result, not the cause.
"It is impossible for an effect to be stronger than its cause" -(Aquinas, 1274)
Mike, your old pal some cluttered cognitions on the interview:
http://market-ticker.org/akcs-www?post=214818
LOL.
"I've tried doing the math necessary to show that a credit-based system is impossible"
When you say "impossible", don't you just mean it goes through boom-bust cycles?
Like perpetual motion machines are impossible.
"When you say "impossible", don't you just mean it goes through boom-bust cycles?" - y
No, I mean there can be no net real growth as a result of a credit-only circuit.
If credit drives "gains" that later have to be given back because the gains haven't been monetized, this is a boom-bust cycle. This is the only thing possible with a credit-only circuit.
All that will have happened is that existing wealth will have been shifted from one part of the economy to another.
The definition of growth is important here. Just because some products were created does not imply growth.
Resources are merely changed from one form (raw materials) to another (delivered goods and services) through the application of labor (energy provided by the Sun) motivated by the acquisition of money that can be used for commerce.
Growth would be measured by an increase in net dollars on balance sheets (impossible) or an increase in wealth based on increased valuation (unlikely, as it depends upon leverage).
If there is no growth of net funds, on what will the leverage be based? Can a man truly pull himself up by his own bootstraps?
The real challenge is that population and energy use have increased exponentially over the last century and a half or so, while finite natural resources are depleting and non-financial capital is constantly deteriorating. In addition, humans are fouling the nest with deleterious consequences to health, the environment and climate. This trajectory is not sustainable over time.
Scientists are so concerned with this that some, like Stephen Hawking, have warned that humanity needs to open the system not only through solar energy for example, but also space mining and eventually space colonization. Others, like Ray Kurzweil, think that it's an intelligence problem that will be resolved through the development and implementation of AI.
Whatever, the real economic problems are not financial but actual. Money and finance are properly in service to the actual. What we need is a sustainable actual dynamic system to serve as the life-support system of humanity as a species gaining species consciousness and function as such through "globalism."
This will require a re-envisioning of economics as a knowledge discipline and a complete overhaul of finance as a tool to be used in conjunction with others in meeting humanity's challenges going forward. We have to start seeing this as an engineering problem and a management problem, rather than through the imaginary eyes of defunct economists.
"If credit drives "gains" that later have to be given back"
But the whole credit structure doesn't collapse, only a bit of it. prices don't go from 0 to 100 and then back down to 0.
"But the whole credit structure doesn't collapse, only a bit of it. prices don't go from 0 to 100 and then back down to 0" - y
Why pick 0 to 100?
Prices would go from some level to another and back close to where they were, probably.
It isn't so much the credit structure collapses… the assets end up being held by one group, the liabilities another.
Then what? How does the economy move forward? Without net money expansion?
"Whatever, the real economic problems are not financial but actual." - Tom
Tom, exactly, and mis-using the financial aspect keeps us from working on actual problems.
Prices would go from some level to another and back close to where they were, probably.
It isn't so much the credit structure collapses… the assets end up being held by one group, the liabilities another.
Then what? How does the economy move forward? Without net money expansion?
Credit is based on collateral and income. When asset values collapse, then the amount of credit that can be extended shrinks. Moreover, the economy contracts and less income is available to pay current debts, let along new ones.
In an economy dominated by credit, then a deflationary spiral results and where that stops no one knows without an exogenous add.
deflationary spiral? such a thing has never happened. this is purely theory with zero fact to back it up.
prices go down all the time and theres never a deflationary spiral, the reason is time preference in consumption. the easiest to describe is the electronics market, prices always drop yet products still sell at the high price even as consumers know the price will drop if they save their money and wait a few months. why do they do this, time preference.
give me a case of deflationary spirals in history?
See Irving Fisher, The debt deflation theory of great depressions. The US was stuck in debt-deflation until WWII spending pulled us out of it.
"deflationary spiral? such a thing has never happened." - Daniel Jones
We've consistently run deficits over the past 85 or so years so it would be kind of difficult for a deflationary spiral to occur...Tom and I were referring to what would happen in a credit-only environment.
Try reading the comments all the way through and cut back on the reactionary responses...logic is an option.
We have made the effort to present reasons for our arguments...that makes your job easy...all you have to do is (try to) undermine our premise.
world war two spending didnt pull us out of the great depression..economic and historical fallacy.
youve never read the broken window theory, whats seen vs unseen. building bombs and blowing things up is the destruction of resources and capital and in no way benefits society or grows an economy.
"…building bombs and blowing things up is the destruction of resources and capital and in no way benefits society or grows an economy." - Mr. Jones
We didn't blow anything in the US up and we put people to work, filled their savings accounts with massive amounts of cash that led to one of the biggesst booms in history. And we were left with plenty of capital.
The most important capital is human capital. Money costs nothing.
You aren't even trying. Why do you bother?
youve never read the broken window theory, whats seen vs unseen. building bombs and blowing things up is the destruction of resources and capital and in no way benefits society or grows an economy.
Not recommending it, but, as a matter of historical fact, that is what happened in he first half of the 20th century, after which the Cold War began and a few hot wars, too.
As a result, military expenditure remained high through the century and still remains so, with the entire world ramping up now. A good % of US, Brit, French, and German exports are military or military-related. When this happens over time, economies become dependent on them, and that influence policy.
We didn't blow anything in the US up and we put people to work
Actually, wars and natural disasters generally do grow economies if they can rebound. Both wipe out a lot of capital and infrastructure that needs to be replaced and they generates a lot of jobs and provides upgraded capital and infrastructure.
The US provided the $ to rebuild Europe after WWII through the Marshall Plan and lend-lease, greatly increasing US exports to do so. So even though the US is not suffer damage, it was able to profit from the devastation elsewhere, and learning the lessons of the "peace" after WWI, was able to avoid making the same mistakes.
If the US had gone to a Marshall Plan domestically at the outset of the Great Depression, unemployment would never have hit the level it it or persisted as long.
Without that input after WWII, history would be very different.
One of my issues used to be the Broken Window Fallacy but then credit theory or circuit theory aka horizontal money showed me it netted to zero unless the government had some input so I moved on.
The real fallacy is confusing a window pane with capital. When capital is destroyed in war or through a disasters, new and upgraded capital is created by the injection of financial capital by government, which if sovereign in its won currency, has unlimited financial capital to draw on without cost, since if it issues interest-bearing debt, issuance also funds the interest.
While wars and disasters are regrettable occurrences they can be a source of growth and employment without threatening price instability. Fortunately, the US had some pretty sharp people during WWII and post-war, and the result was decades of relative prosperity in the US and recovery in Europe. Moreover, the countries that were enemies in the war became allies and friends.
Post a Comment