An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
Well, I think Mosler's been on this schtick for the last 1,000 posts pointing out how mediocre the economy is, as it has gotten somewhat better and better for most people. He had recommended to fade the S&P, but the Euro and a few other not great calls, after years of being spot on. He's had a run of bad ones.
I think he has fixated on this one thing about muddling through but ignoring too much of the rest of the world and the changes in technology, energy, labor markets worldwide. I used to look forward to reading his insightful posts more than any other economics blog but now it's just uncomfortable and awkward because its like he just repeating his idea until it comes true. Or maybe it is true in parts of the country. Or maybe those posts would have been better coupled with policies that would have fixed the low performance of the various metrics. Or I just misunderstood the point? I don't know, I think the economy will tend toward some rate of growth based on population and productivity without any government at all but with periodic episodes of collapse. Anything the government can add toward stability and financial savings is simply a bonus and there to help smooth out the cycles. Government *should* respond to the private sector, but never really has, never will, and precious few institutions are designed to be counter cyclical in spending. So we muddle through. Maybe that is Moslers point? I don't know. I hope he puts on the thinking cap and writes something new, this old theme is boring me to death.
"Just to take for example, this telephone conversation, which I imagine is taking place over an Internet connection: we have paid our flat rates, and we are conducting it essentially for free. If we were doing this thirty years ago on a long-distance phone connection, it would be metered by the minute, and it would be adding to GDP; but as it is, it’s not. So that’s a difference in the way in which technology interacts with the kinds of accounts that we have, that suggests to me that it’s a factor that’s going to slow down the recorded rates of growth, and the rates at which businesses can enter revenue in their ledgers."
So I dont know if worrying all about "GDP growth" is very useful or helpful at least in this age of rapid technological advances and high productivity growth in many industries...
I dont think what JG is saying here is synonymous with Larry Summers "secular stagnation"...
Galbraith (to me) is more talking about the usefulness of our measurements/methods wrt "GDP"...
Every productivity increase needs extra aggregate demand on the other side just to keep employment at the same level.
So all those technologic breakthroughs call for more and more spending. If the private or foreign sector provides it, fine. If not the government should come to the rescue. The GDP concept is thus more relevant than ever.
Relevant but limited. GDP is a tool. Like other tools it can be used and misused.
The problem is that GDP is called upon ideologically to do things for which it was not designed.
GDP per capita says nothing about distribution, for instance.
And it fails to count real product that is not monetized (informal economy). This is a big deal in the emerging world where the large, traditional and significant informal economy is being monetized to the benefit of the ownership class and its cronies and minions.
And it makes no distinction between real product and financialization. So greater financialization with declining manufacturing is considered to be "growth." So a country can be growing while being hollowed out.
The point Galbraith makes is that the technology leads to "deflation" or at least falling prices... which, again, as Warren asserts, is HIGHLY PROBLEMATIC FOR BANKS....
So some of the banks figure out ways to lay off this risk in their self-interest/self-defense...
Technology will lead to deflation only if Aggregate Demand does not keep up.
That´s the problem with the eurozone right now. The EC and the ECB say they are ready to fight deflation with all the available tools - except, that is, the one tool able to do the trick: fiscal policy.
I think the "demand" is always there in our economic systems..
"demanda" ;)
So I don't understand the phrase "we need more demand"... like there is some missing?
The demand is there all the time... people/households ALWAYS want/need robust provision... let's say they "demand to be provisioned...."
In electrical analogy, its like a "load":
http://en.wikipedia.org/wiki/Electrical_load
So it is not the "demand" that needs to keep up, it is THE SOURCE that needs to be connected to/with the "demand"...
We have a "transmission system" problem imo...
And the main problem is that no one on planet earth adequately understands how our "transmission system" is currently operating imo... and we have the resultant chaos...
I found this podcast quit interesting. We MMTers need a better explanation of how some people do well in the economy even when when budget is being cut and net private savings start declining but people adapt to the "new normal" and still create growth.
It seems to me that we all know the finance and fiscal side is being run by criminals and morons but we have to keep in mind that the physical productive powers are still developing and people using more advanced technical capacities to bypass the systematic mess of the institutions.
There can be a disconnect between what happens in the stock market and the economy. Bear vs. Toast?
ReplyDeleteWell, I think Mosler's been on this schtick for the last 1,000 posts pointing out how mediocre the economy is, as it has gotten somewhat better and better for most people. He had recommended to fade the S&P, but the Euro and a few other not great calls, after years of being spot on. He's had a run of bad ones.
ReplyDeleteI think he has fixated on this one thing about muddling through but ignoring too much of the rest of the world and the changes in technology, energy, labor markets worldwide.
I used to look forward to reading his insightful posts more than any other economics blog but now it's just uncomfortable and awkward because its like he just repeating his idea until it comes true. Or maybe it is true in parts of the country. Or maybe those posts would have been better coupled with policies that would have fixed the low performance of the various metrics. Or I just misunderstood the point? I don't know, I think the economy will tend toward some rate of growth based on population and productivity without any government at all but with periodic episodes of collapse. Anything the government can add toward stability and financial savings is simply a bonus and there to help smooth out the cycles. Government *should* respond to the private sector, but never really has, never will, and precious few institutions are designed to be counter cyclical in spending. So we muddle through. Maybe that is Moslers point? I don't know. I hope he puts on the thinking cap and writes something new, this old theme is boring me to death.
Comes back to recent Galbraith for me:
ReplyDelete"Just to take for example, this telephone conversation, which I imagine is taking place over an Internet connection: we have paid our flat rates, and we are conducting it essentially for free. If we were doing this thirty years ago on a long-distance phone connection, it would be metered by the minute, and it would be adding to GDP; but as it is, it’s not. So that’s a difference in the way in which technology interacts with the kinds of accounts that we have, that suggests to me that it’s a factor that’s going to slow down the recorded rates of growth, and the rates at which businesses can enter revenue in their ledgers."
So I dont know if worrying all about "GDP growth" is very useful or helpful at least in this age of rapid technological advances and high productivity growth in many industries...
I dont think what JG is saying here is synonymous with Larry Summers "secular stagnation"...
Galbraith (to me) is more talking about the usefulness of our measurements/methods wrt "GDP"...
rsp
Every productivity increase needs extra aggregate demand on the other side just to keep employment at the same level.
ReplyDeleteSo all those technologic breakthroughs call for more and more spending. If the private or foreign sector provides it, fine. If not the government should come to the rescue. The GDP concept is thus more relevant than ever.
Relevant but limited. GDP is a tool. Like other tools it can be used and misused.
ReplyDeleteThe problem is that GDP is called upon ideologically to do things for which it was not designed.
GDP per capita says nothing about distribution, for instance.
And it fails to count real product that is not monetized (informal economy). This is a big deal in the emerging world where the large, traditional and significant informal economy is being monetized to the benefit of the ownership class and its cronies and minions.
And it makes no distinction between real product and financialization. So greater financialization with declining manufacturing is considered to be "growth." So a country can be growing while being hollowed out.
And then as Warren reminds us:
ReplyDelete"Deflation is highly problematic for banks."
The point Galbraith makes is that the technology leads to "deflation" or at least falling prices... which, again, as Warren asserts, is HIGHLY PROBLEMATIC FOR BANKS....
So some of the banks figure out ways to lay off this risk in their self-interest/self-defense...
Technology will lead to deflation only if Aggregate Demand does not keep up.
ReplyDeleteThat´s the problem with the eurozone right now. The EC and the ECB say they are ready to fight deflation with all the available tools - except, that is, the one tool able to do the trick: fiscal policy.
Jose,
ReplyDeleteI think the "demand" is always there in our economic systems..
"demanda" ;)
So I don't understand the phrase "we need more demand"... like there is some missing?
The demand is there all the time... people/households ALWAYS want/need robust provision... let's say they "demand to be provisioned...."
In electrical analogy, its like a "load":
http://en.wikipedia.org/wiki/Electrical_load
So it is not the "demand" that needs to keep up, it is THE SOURCE that needs to be connected to/with the "demand"...
We have a "transmission system" problem imo...
And the main problem is that no one on planet earth adequately understands how our "transmission system" is currently operating imo... and we have the resultant chaos...
rsp,
This comment has been removed by the author.
ReplyDeleteI found this podcast quit interesting. We MMTers need a better explanation of how some people do well in the economy even when when budget is being cut and net private savings start declining but people adapt to the "new normal" and still create growth.
ReplyDeleteIt seems to me that we all know the finance and fiscal side is being run by criminals and morons but we have to keep in mind that the physical productive powers are still developing and people using more advanced technical capacities to bypass the systematic mess of the institutions.