The New Economic Perspectives’ video clip on the Government budget, Deficits and Debt presented below (produced for educational purposes), debunks the myths that politicians tell their populations to justify ‘austerity’. In the case of the clip, it starts with 3 full minutes of American politicians misinforming the electorate. An identical montage aimed at the UK electorate could undoubtably just feature George Osborne’s utterances from his forthcoming Autumn statement scheduled for this Thursday (5th December 2013).
However, the reality is that all economists know that the deficit and debt mythologies are not true and ’have long known that the idea of balancing budgets over the cycle is a bit like a fairy story we tell to frighten the kids’.Nice post. Nice intro to MMT. Good work, JK.
Think Left
Why do politicians tell us Debt/Deficit myths which they must know to be untrue?
(h/t Andy Blatchford on FB)
Thanks Tom. The political elite at the beginning of the video come off as fools or liars. It's still hard to know which is a more accurate description., and also: which is worse?
ReplyDeleteIs it worse that they have no idea what they're talking about, or worse that they know better and lie?
Intentionally lying or concealing the truth is morally worse than culpable ignorance. But some politicians are probably just ignorant, too.
ReplyDeleteI agree with Tom: it's a mixture of lies and ignorance.
ReplyDeleteTom,
ReplyDeletedo you think my left hand/right hand example is an ok explanation, or not?
http://www.blogger.com/comment.g?blogID=2761684730989137546&postID=4703578239682915605
Maybe jkh should accuse 'MMT' of lying when MMT says 'the govt neither has nor doesn't have money'...
ReplyDeleteRsp
And this is kind of funny where this person who writes this post here points out 3 minutes of video where we see these pols proving they have no clue but then goes on to assert they are lying with no evidence, just a statement from a now dead person from 13 years ago after just showing 3 minutes of current evidence to the contrary... Amazing.
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ReplyDeletethe point is that if you were to tell one of those politicians who say "the US has/will run out of money" that the US can't run out of dollars, they would probably reply that Zimbabwe couldn't run out of Zimbabwe dollars either.
ReplyDeleteMost people know that the government issues money, but they still believe that investors might stop buying government bonds, that this would lead to disastrous consequences, and that 'printing money' would only lead to hyperinflation. This is why they say things like "we're gonna run out of money". To change their beliefs it's not enough to just say that the government can create money. You have to explain how their entire belief system about investors not buying bonds and 'printing money' = hyperinflation, etc, is wrong.
It took me quite a while to get my head around MMT. There was a time when I unquestioningly believed the whole story about the government having to borrow from the private sector and the possibility that it would soon 'run out of money'. Strange but true. It was because that's the only story you ever hear from the media. Trying to think about the issue in a different way can be quite difficult to begin with, when you have been indoctrinated over years and years.
Over time I've come to appreciate the similarities between religion and economics, as regards their relationships with truth and conventional wisdom.
ReplyDeleteFew people, including politicians, would take every word of the dominant religious dogma as the literal truth. Nevertheless, they believe that the moral order requires the social leaders to go along with religious leaders. In this manner, society maintains a moral code.
Steve Keen recently came out in favour of the Bancor to replace the dollar as international reserve currency:
ReplyDeletehttp://www.youtube.com/watch?v=FoLyd_Hq32Q
most current politicians are fools and liars?
ReplyDeleteWhat's that say about the electorates who select political representatives? We get group foolishness when politics slides into religious-type factions?
Root issue is that people will do anything in their power to avoid thinking ... until they have to.
Example: Wife & I were chatting re the Sochi Olympics with a seemingly REALLY gracious young bartender, into craft brewing ..
Russia banning gays from Sochi inevitably came up, he says "I don't like gay people anyway."
?? Why not?
He says "I'm a Christian. Homosexuality is a sin."
So, we laughed, & gave him a quick tutorial on 320 million citizens, each with 1X-Trillion cells, 200+ cell types, ~60 organs ... and embryonic development ... and posited that recombinant variance would absolutely DICTATE some frequency of "gay" humans .. and many other variants too (left handed? color blind? IQ range, emotional range, sexuality range, etc,etc)
Being capable of abstract reasoning, he responded: Yeah, you're right, when you say it that way.
....
"But I'm still against gay people. My religion just tells me to be."
Whatever!
It's just a social habit he doesn't yet feel the need to challenge? Anymore than driving on one side of the road? Or just like his dress, language, and other things he shares as affinity bonds in his community?
{we didn't bother discussing any more policy stuff; he's obviously just learning, but not yet motivated to learn too fast; pushing his envelope would only stress him ... to no positive immediate outcome}
Time is required. Unfortunately.
We have tens of millions of similarly UNTHINKING PEOPLE ... in all countries.
I don't think that there is anything wrong with the logic, but I think that the issue really comes down to the meaning of "money," as I stated above. A great deal of the disagreement seems to me to be to be related to different conceptions of money.
ReplyDeleteThis is related to the discussion with JHK in the comments to another post, that is, is the financial statement v. operational distinction that JKH brought up above. Basically, accounting entries are like the sectoral balances in that that they set the boundary conditions for stock-flow consistency. But they don't say anything about operations or causal, which is where the interesting things happen.
An adequate explanation must integrate operations and causality with financial statements as both relevant data and also boundary conditions.
MMT economists have been pretty clear about all this. Some people don't agree with them.
Y, the (good) comparison you had in mind, I think, central bank vs treasury compared to left hand vs right hand, is in Lerner. He compares debts of the CB and the T to each other to a left pocket owing a right pocket.
ReplyDeleteBut the comparison is much older - Jean-François Melon compared a national debt (internally held) to a left hand owing a right hand.