Every week, my local rag is filled with out of context foolishness like:
"we're running out of fiat"
"salt is a suspect in retaining water"
"national income comes only from exports."
Isn't data meaningless without context? Isn't coordination an inexhaustible source of fiat? Do economists even recognize currency operations, or only pure theory unadulterated by reality?
Don't more old folks get ill from low sodium than too much salt (and don't most kids learn about osmotic pressure from ANY solute, in high-school chemistry)?
And don't we EVER teach people the difference between real resources and liquidity, or between static-value and dynamic-value?
So it's true, the newspapers were fooling, nearly 100% of the time, my whole life. Can we either fire all journalists, newspaper editors and owners ... or AT LEAST require them to do some fact checking instead of just crying wolf in order to draw attention to conveniently placed ads for s**t we don't need?
200 years on and the following is still true. The man who reads nothing at all is better educated than the man who reads nothing but newspapers.
And the citizen who listens to no one at all is better educated than those who listen to any and all orthodox news media? And it's all the fault of all those sources. It's not ours - for listening to fools & frauds.
9 comments:
When I enter into economic debates with people and try to enlighten them to MMT, I find that I can credibly represent and defend nearly all of the MMT principles, save one. While I can prove that Federal "debt" = savings accounts of the private sector at the FED, this usually generates the response of "yet we still need to service that debt with interest payments." Payments which are an ever increasing percentage of GDP. While these payments add to income and savings, how do I defend the notion that these payments don't contribute to the devaluation of the dollar with a simple and concise argument.
"how do I defend the notion that these payments don't contribute to the devaluation of the dollar with a simple and concise argument."
Maybe point out that money created that goes to the rich tends to go to savings, so it doesn't affect spending much if at all.
No big increase in spending should mean stable prices, resource limitations notwithstanding.
The relative value of a currency is based on the soundness of the country's economy and the willingness and ability to service its debts. The ability of a currency sovereign to pay its nominally denominated debts in the currency is not an issue. So the issues is willingness to pay, and the soundness of the economy. So the questions are, how likely is voluntary default, along with what is the state of the economy and where is the economy heading.
There are three constraints on the currency sovereign that the sovereign has to take into consideration in economic policy wrt the currency. The first is availability of real resources to purchase with the currency. The second is inflation, and the third is the exchange rate.
The overall issue, then, is not "sound money" as much as the soundness of the economy. The govt must conduct economic policy to enhance the soundness of the economy and all else will flow from that. This requires harmonizing growth (production and productivity), employment, and price stability.
This means for one thing that monetary and fiscal policy need to be managed so as to achieve the appropriate amount of non-govt NFA as conditions change. since money is endogenous, this requires the use of rules and automatic stabilizers instead of depending on ad hoc exogenous responses.
Govt controls its monetary policy in that the cb sets the interest rate and can control the yield curve as well.
MMT economists hold that the superior way to manage economic policy is through fiscal policy rather than monetary policy. Warren Mosler has proposed setting the overnight rate to zero, and not limiting term of tsys to no more than 3-mo duration.
@Broll
"Fiat interest on fiat bonds."
If carried far enough, that discussion eventually leads to 2 points.
First, we can't fail to pay the interest, since we can always generate as much fiat as we want.
So, second, the argument reduces to either
a) arbitrarily maintaining the purchasing power of previously hoarded fiat (liquidity units), by progressively depriving a growing population of both relative liquidity AND return-on-coordination. [Even fools don't want that, when faced with a choice. Only pure sociopaths do.]
or
b) forgoing the buying power of yesterday's liquidity, in order to access the expanded options of tomorrow's return on coordination from more people and more liquidity.
It's the "SOCIAL-SPECIES DILEMMA." Evolve and stay in the adaptive race, by organizing on a larger scale ... or ... become a has been, and be either extinct or domesticated lunch for some other species.
People who save excessivley, i.e., hoard fiat hoarding today's options and depriving their grandchildren of options.
Our granchildren's options are reduced without our full investment in generating those options. Our Output Gap = grandchildren's Options Gap, and the relation is not linear, but exponential.
If our output gap is "j", their options gap is [j(e)], i.e., "j" to some unpredictable exponential "e"
That's how evolution has worked since the dawn of time. We die so that our descendents can be far more than we were. It's called sexual recombination, cultural recombination, and - in general form - Options Recombination
(see Traveling Entrepreneurs Task
http://econintersect.com/b2evolution/blog2.php/2011/12/04/how-individuals-fail-to-understand-evolving-markets
)
Tom and Roger, great comments, very good summary descriptions of the dynamics in play.
Speaking of newspapers fooling the public, I have been in attendance at various events and in several situations "of interest," and later read or saw the news reports. It was obvious that the reporters were not present and were largely just making stuff up.
"…were largely just making stuff up" - Tom
Looks like the 4th Estate has become the 1/4th Estate.
Yes, and this is not based on recent experience either. This was what was happening 30-40 years ago when we had a much more professional press corps than we do now, and news reporting was considered a profession rather than a branch of the entertainment industry.
This all follows from the simple, bottom-up dynamics of organized systems.
Walter Shewhart: "In all complex systems, the highest cost, by far, is the cost of coordination."
Obvious corollary: "In all complex systems, the highest RETURN, by far, is the RETURN on coordination."
Post a Comment