Sunday, March 30, 2014

Brian Romanchuk — Book Review: Capital In The Twenty-First Century


Brian Romanchuk weighs in on Piketty. First review of which I am aware by someone conversant with MMT.

Bond Economics
Book Review: Capital In The Twenty-First Century
Brian Romanchuk

12 comments:

Dan Kervick said...

I'm not convinced yet that the idea of a global financial capital registry is so hopeless.

One way or another, if we want to redistribute wealth, and then keep gross wealth inequality from returning, we are going to have to measure that wealth.

Also I don't understand the insistence on the theoretical dispute about "true" nature of capital. Yes, understanding what real wealth is and how it is controlled is important to social analysis and critique. But for the practical question of regulating wealth in a society in which nearly every transaction is a monetary transaction, why isn't it enough to keep tabs of financial instruments, whose value is easily monetized since they are exchanged every day in financial markets, and since most of them are associated with conditional or unconditional promises of cash flows?

On the other hand, I think Piketty's emphasis on patrimonial plutocracy is a little bet of a red herring. A grossly unequal plutocracy is undemocratic and socially destructive, whether it is manned by aristocrats or meritocrats.

Clonal said...

Tom, James Galbraith had a review also. I am certain that he is conversant with MMT - I linked to it in the comments earlier.

Clonal said...

Just to reiterate, Galbraith's article is one of the best I have seen to date of Picketty's book.

Tom Hickey said...

I posted a link to it some time ago.

http://mikenormaneconomics.blogspot.com/2014/03/james-k-galbraith-kapital-for-twenty.html

Tom Hickey said...

Just to reiterate, Galbraith's article is one of the best I have seen to date of Picketty's book.

Agree. He read it closely and comments in detail.

Matt Franko said...

"Low interest rates appear to act as a subsidy to the corporate sector at the expense of households who hold fixed income assets. Since the very rich have portfolios weighted towards equities, low interest rates presumably accentuate inequality."

I agree with Brian here and deviate from perhaps the mainstream MMT view that govt paid interest is a "subsidy for the rich"... I dont see that at all...

I see the current ZIRP as really hurting our seniors who have saved for retirement... and look forward to the end of QE and then eventually ZIRP...

Good review from Brian here who also brings in the "wealth effects" of the public pensions/transfer payments such as US Social Security (and Brian also we have the Medicare/Medicaid in the US which has the same effects...which is probably just as large to larger than our Social Security...)

A large portion of the value of firms derives from the cash flows received from provisioning the people who receive these transfer payments directly or on their behalf... so without those govt sector originated flows the value of the firms would be MUCH less than current...

rsp,

Clonal said...

Tom, I missed it when you posted it.

Unknown said...

"I see the current ZIRP as really hurting our seniors who have saved for retirement"

Mosler's argument is that you should replace that interest income for retirees with direct fiscal credits.

Jose Guilherme said...

Mosler's argument unfortunately does not apply in the current situation where 1. Interest rates are near zero and 2. Govt. has not and likely will not provide fiscal credits for seniors.

Unknown said...

that is correct, Jose.

Brian Romanchuk said...

Warren Mosler's point that the loss of interest income could be made up by loosening fiscal policy is good. That covers the loss of demand. The concern I see is the issue of low interest rates being a corporate subsidy. That should have the effect of accentuating inequality.

One argument is that you could not worry about inequality at the top end (other than enforcing tax law), and instead target raising the bottom end of the distribution.

The loss of a government bond market does pose one additional problem - the private sector loses liquid assets that are negatively correlated to equities in a crisis. The banking system would have lots of risk-free reserves, but that might not be enough to stabilise the system.

Tom Hickey said...

There's no hardened MMT position on this, and there's no reason not to provide government securities bearing interest if there is public purpose to justify it.

The US government still issues EE/E bonds for "retail savers." Warren is also OK with short term bills as cash substitutes that earn a bit of interest for large scale deposit holders whose holding exceed deposit guarantees.

I can see issuance of government securities along the curve, perhaps as consols for those desiring a longer term saving vehicle. I would fix the rate, say 3% for the ten year, and let the price float in the market to establish the yield.

If government is going to be the monopoly provider of the currency, then it has to ensure that all facets of public purpose are met. In a non-convertible floating rate system, the available policy space is delimited by unacceptable price variance both deflationary and inflationary. But that's just the starting point of discussion. There's a lot more that the monetary/fiscal authority can accomplish through its management of the currency, and there are different ideas about this.