Los Angeles Times
Op-Ed — Congress can give every American a pony (if it breeds enough ponies)
Stephanie Kelton | professor of public policy and economics at SUNY Stony Brook, chief economist on the U.S. Senate Budget Committee in 2015, and an economic advisor to the Bernie Sanders 2016 presidential campaign.
98 comments:
True to Form Cullen goes into full attack mode
https://www.pragcap.com/donkey-economics/
Next week she is in the NY Times talking about debt to GDP ratios.
she should have said 'congress can buy a pony for every American (if the private sector breeds enough ponies)"
they are all just soooooooo left.... and the nation right now is swinging right...
I'm seeing that a fair bit. There is a clearly a normative divide along the lines that Kalecki noted.
Here's a quote from a commentator of mine this week.
"The problem with artificially giving every one a job with a living wage is that it will lead to laziness and sterility in the culture."
so we're back to Kalecki:
"'discipline in the factories' and 'political stability' are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the 'normal' capitalist system."
The key point Cullen misses, as usual, is the assumption that private sector activity - particularly in the service sector - is productive and useful.
Why is a society that breeds ponies and looks after them any less productive than one that breeds cryptocurrencies, high frequency trading or psycological manipulation techniques designed to get people to purchase other things that are completely unnecessary.
It's actually fairer, because that use of resources was decided by a vote of everybody, not just by those with money.
she should have said 'congress can buy a pony for every American (if the private sector breeds enough ponies)"
She does in the article.
Buried in the lede then...
Tho Any pub is good pub to an extent...
Think about the arts too Neil... many starving... we could put A LOT in there and not bat an eye....
But what if I told you that your intuition was all wrong? What if it turned out that the government really could give everyone a pony — and a chicken and car? That is, so long as we could breed enough ponies and chickens and manufacture enough cars. The cars and the food have to come from somewhere; the money is conjured out of thin air, more or less.
Cullen is jealous. He didn't think of it.
Neil,
Your commenter. "The problem with artificially giving every one a job with a living wage is that it will lead to laziness and sterility in the culture."
The ‘ole moral hazard argument. Wonder why none of that happened in the 30s when FDR did the New Deal and that civic youth program, whatever it was called. Stupid phuck.
netbacker, Cullen is still claiming that taxes fund the federal government. Facepalm. Doesn't have the smarts to look at a Daily Treasury Statement.
Roche, though he has repeatedly and absurdly denied it, is a conservative. He does not want an economy in which workers cannot be thoroughly disciplined by their betters.
Cullen is anti-Trump....
Still say the headline is bad...
"It" implies the govt itself is breeding the horses....
In the US, the pony breeders society only allows licensed breeders to breed. It takes 25 years of training and 200K in debt to get that training. The motion picture association owns the rights to pony pictures and holds royalty interests in all ponies produced that must be paid monthly. While state and local governments have a pony tax and the government has a pony ownership requirement. Pony DNA is patented by Microsoft and copies can't be made unless you activate the sperm first. Saddles bits and plows have been outlawed for animal cruelty by PETA lobbyists. And the climate lobby won't let you feed the animals anything that might create methane farts. But other than that, congress can totally fund ponies. The bottle neck is writing the check and NOT the western economic system.
"There’s just one catch. The big secret in Washington is that the federal government abandoned TABS back when it dropped the gold standard."
Its not a secret in Washington....
It's the Tax issue he hates he 100% believes taxes fund future spending and are not destroyed.
This is his critique in his own words below...
Here’s how MMT claims this works:
1) The govt spends.
2) The govt provisions a tax.
3) You pay your taxes.
4) The Fed and consolidated Treasury obtain their own liability which technically “destroys” the money.
Rinse, wash repeat.
This, of course, is total horse shit. This is how it really works:
1) Someone borrows deposits from a private bank.
2) Someone spends money incurring a tax liability.
3) Someone pays those taxes using deposits.
4) Fed clears payment from bank to Treasury.
5) Treasury spends money and Fed credits bank with the same deposits that entered via taxation.
You literally cannot “destroy” the funds because it’s really a banking system liability that you’re transferring and the banking system needs those short-term liabilities to fund their payment system.
Plus, the only reason the Fed is even involved in the MMT scenario is because there’s private banks. But MMT consolidates the Fed into the Tsy in their accounting which is the exact equivalent of removing the private banking system. After all, the only reason we even have a Fed is because we have a private banking system that needs central clearing. MMT literally just changes the whole thing to make it look like the Treasury is both the banker to the whole nation and the central bank.
I like a lot of MMT’s ideas, but they are totally wrong here.
They can justify it by fudging the accounting. For instance, if you consolidate the Fed and Tsy balance sheets then any time the Tsy obtains a payment cleared by the Fed they are obtaining their own liability because the Fed is technically a part of the govt. This is like a bank obtaining its own liability when you repay a loan. It results in the balance sheet shrinking. MMT will say that this results in the money being “destroyed”. Except there’s a huge problem with this idea – the US govt isn’t really taking back its own liability and spending it. It is actually clearing the payment of a non-govt liability – the banking system’s deposit. And when it spends it will credit someone’s bank account with deposits.
So, you can see what they do there – they fudge the accounting to create the illusion that the money is getting destroyed because they fudge the flow of funds.
It’s very sneaky and clever actually. I fell for it for almost a year back in 2010 when I first came across it. It checks out as correct at first glance and it takes a bit of mental gymnastics to understand why it’s wrong because from a strict accounting perspective it can be viewed as right if you fudge the facts a little.
The Tsy has accounts with banks and the Fed. So yes, when you transfer money to pay taxes the govt is really getting a bank deposit liability. It’s accounted for just like any other interbank payment. The Fed acts as a middleman to transfer reserves to clear the payment and the Tsy will spend the deposits right back into the banking system. In fact, the Tsy HAS to spend the deposits back into the banking system or they would create a short-term funding short-fall.
So it’s all very clear – the flow of funds here starts with the banks and the govt uses the deposits to fund their spending. "
Foot I think if you went back and looked at the data from the 90s, you would see Treasury auctions that exceeded the amount of system reserves published the day before the auction...
So it would be impossible to settle the auction unless the govt added reserves first that day; for the specific purpose of settling the Treasury auction...
Warren: "to do a reserve drain you first have to do a reserve add...." there is no getting around this...
MMT: Money-making for the one-percenters
Comment on Stephanie Kelton/Op-Ed* on ‘Congress can give every American a pony (if it breeds enough ponies)’
Stephanie Kelton explains how the economy works. For laypersons the point to grasp is that government spending comes before taxation:
“1. Congress approves the spending and the money gets spent (S)
2. Government collects some of that money in the form of taxes (T)
3. If 1 > 2, Treasury allows the difference to be swapped for government bonds (B).”
The point is, of course, that it does NOT matter much whether (S) comes before (T) or vice versa, this is merely a question of cash management, the point is whether total spending (S) is greater, equal, or less than total taxes (T) in the period under consideration, i.e. whether one has a government deficit, a zero balance, or a surplus at the end of the current budget period.
The crucial point is NOT that the government can make money appear out of nowhere like magic, that has always been trivial, the crucial point is what happens in the economy. Stephanie Kelton does not tell us, most probably because she has no idea.
What the layperson cannot see is that MMT has NO sound scientific foundations. The MMT models are based on Keynesian macro which has been refuted long ago.#1 Because it is defective, MMT macro has to be fully replaced.
As the correct analytical starting point, the pure production-consumption economy is defined with this set of macro axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.
Under the conditions of market clearing X=O and budget balancing C=Yw the price is given by P=C/X=W/R, i.e. the market clearing price is in the initial period equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand. For the graphical representation see Figure 1.#2
Monetary profit for the economy as a whole is defined as Qm≡C-Yw and monetary saving as Sm≡Yw-C. It always holds Qm+Sm=0, in other words, the business sector’s surplus = profit (deficit = loss) equals the household sector’s deficit = dissaving (surplus = saving). This is the most elementary form of the Profit Law. Under the condition of budget balancing, total monetary profit is zero.
Now, the government decides that in the next period every American should get a pony. So, government expenditures in period 1 are Cg1 and taxes are zero. The government runs a deficit, the money comes from the central bank, i.e. is created out of nothing.
It is assumed for simplicity that the business sector doubles initial employment L0, i.e. L1=2L0. The wage rate W remains unchanged and therefore total wage income doubles, i.e. Yw1=W2L0. Under the condition of budget balancing, the household sector’s consumption expenditures, too, double Ch1=Yw1=2WL0.
See Part 2
Part 2
So, total expenditures are Ch1+Cg1=2Ch0+Cg1, that is, are more than double the expenditures in the initial period. On the other hand, output exactly doubles O1=RL1=R2L0. The market clearing price is now P1=C1/X1=(2Ch0+Cg1)/2X0=P0+Cg1/2X0, that is, the market clearing price rises despite the fact that employment and output has doubled. This is a one-shot increase and has NOTHING to do with inflation. The price increase effects the redistribution of real output between the household and the government sector.
The profit of the business sector was zero in the initial period and is now positive, i.e. Qm=Cg1, i.e. equal to the budget deficit. It ALWAYS holds Public Deficit = Private Profit. This can go on for an indefinite time with public debt vis-a-vis the central bank rising continuously and with the business sector’s pile of cash rising continuously and with the number of ponies rising continuously and with price stability. Quite obviously, nobody has any reason to complain. In Stephanie Kelton’s words: “Just imagine how high those poll numbers would climb if everyone understood how easy it would be for Congress to pony up.”
It is remarkable that the word profit does not appear once in Stephanie Kelton’s op-ed but the word pony eight times. Never were more ponies used to propagate a profit booster program for the one-percenters.#3
Egmont Kakarot-Handtke
* Los Angeles Times
http://www.latimes.com/opinion/op-ed/la-oe-kelton-pony-for-all-20170929-story.html
#1 How Keynes got macro wrong and Allais got it right
http://axecorg.blogspot.de/2016/09/how-keynes-got-macro-wrong-and-allais.html
#2 Wikimedia, Pure production-consumption economy
https://commons.wikimedia.org/wiki/File:AXEC31.png
#3 For the full-spectrum refutation of MMT see cross-references
http://axecorg.blogspot.de/2017/07/mmt-cross-references.html
Still say the headline is bad...
I don't think economists can do this alone. Need an organization that has professional input not only on the content, but also presenting it and testing the effect. Also need PR people to spread the message widely in the echo chamber.
This is how the American political process works now. If your side is not doing it, they will have little chance of success.
This basically means that some billionaires have to get behind it.
She probably didn't write the headline probably some out of paradigm person at the paper who doesn't even get it themselves....
Right. Authors don't usually have control of the title unless they have a lot power. This is another advantage of having an organization behind the message. An organization can exert power that an individual can't.
Modern capitalism is based on competing organizations rather than individuals as advertised.
Universities are supposed to teach this stuff. Not media PR groups paid for by Billionaires.
MMT was started and supported by our resident billionaire, Mosler. Not that there is anything wrong with that.
" Treasury allows the difference to be swapped for government bonds (B)."
Egmont,
The govt bond accounting is Cash Basis (see US Daily Treasury Statement) while I don't think the other terms in your equations are accounted for in Cash Basis ... they are accounted using a Modified Accrual Basis ....
In Accounting, You can't mix the Basis ....
"Universities are supposed to teach this stuff."
How about it.... this is what you get when you put the C students who went to college in charge of one of the departments...
He has forsaken any credibikity
Bingo
Would not have gotten off the ground without Warren. But I don't believe that he is a billionaire. He doesn't seem to be supporting MMT on the level he was before either. Need to recruit some billionaires to fund the next push and hire some professionals to run it. The economists should just create the content.
And Soros's INET ain't it, just like the Roosevelt Institute, which the MMT economists abandoned when the Peterson people came in.
Think creating a competitor to The 50 Most Influential Think Tanks in the United States/
That is some stiff competition.
Once the attack stage begins, if MMT ever reaches, the battle will be fierce and a lot of $ will be committed.
BTW, a lot of opposition to MMT in the economics profession is because of the level of organization it has already achieved. A customary put down is that MMT has become a cult with a rabid following.
Universities are supposed to teach this stuff. Not media PR groups paid for by Billionaires.
Who do you think determines what is taught in universities, especially economics and business departments.
Hint: the big donors.
And now they are getting more blatant about it, and moving into high schools as well.
Yes Matt I agree.
Has anyone tried to recruit Nick Hanauer, for example?
I notice that he was philosophy major in college. Hit him on the enduring question, "What does it mean (and take) to live a good life in a good society?" Then explain how MMT makes progressive ideals doable policy-wise.
Oh hey. What's up old friends? Nice to see the MMT passion is still running hot! Since I'm getting roasted pretty good here let me clarify a few things:
1) I voted for HRC. I think Trump is a monster. Just look at his response to PR this morning. He's a disaster and I think he's a national embarrassment. I've said this a million times on Twitter and on my site. Conservatives hate me for it....
2) The pony example is dumb. Sorry, but it's dumb. Yeah, it's a metaphor. But it's a dumb metaphor. Part of the reason why Fuckface Von Clownstick is in office is because people are tired of the idea (myth?) that their government is giving away ponies to everyone. They see a "swamp" and a bunch of handouts being given at their expense. So they voted this idiot into office and here we are. If you don't understand that then you're part of the problem and promoting a free lunch (even if you don't really mean that) is going to make the problem worse.
Look. We disagree on some of the operations like the funding stuff. That's fine. But I think we agree on a lot of policies. I think there are logical reasons to argue free education, single payer and (if you guys ever provide real life domestic world evidence) a Job Guarantee. But the needle doesn't move forward when you promote free ponies or even the idea of free ponies. I think it rallies the Democratic base and alienates Conservatives and ahem, moderates (points to self) who are amenable to government spending.
Have a good weekend. Donate to Puerto Rico if you can. Lord knows that Trump isn't going to do enough. He's too busy playing golf....
I think Cullen has established his political left bona fides....
I think the Puerto Rico situation is interesting here... some reports have 9,300 sea containers sitting at the piers not being distributed inland...
Why doesn't the govt just buy up a bunch of surplus 50,000 lb Puerto Rican truck drivers and get it moved out?
Are there any such drivers there? I.e. Real constraints? ... or is there no munnie to pay them? Or what?
Reactionary left is saying it's Trumps fault, reactionary right saying incompetent left local govt....
Maybe they just don't have any surplus certified semi operators down there... so there it sits.... if so munnie isn't going to help....
We are probably facing real skills shortages ....
I got on contact with Warren via facebook last year and he answered me by saying MMT would work in the UK.
Just look at his response to PR this morning.
If you prefer a less hyperventilated and more informative assessment, read this post on Colonel Lang’s site this AM. Trump, the Military, Puerto Rico and the News Media by Willy B. I. What Trump Actually Said. II. What the Military is Actually Doing.
http://turcopolier.typepad.com/sic_semper_tyrannis/2017/09/trump-the-military-puerto-rico-and-the-news-media.html.
The “U.S. Army Corps of Engineers now had full responsibility for restoring power and the grid in Puerto Rico. ‘They've been given the mission’ by federal authority to bring back power, transmission and distribution, Bossert said of USACE. “
“Much is being made of the pileup of shipping containers at the port in San Juan. White House Homeland Security Adviser Tom Bossert said in Thursday that the problem is the lack of trucks and truck drivers. He said that "the challenge becomes land-based distribution." It was especially difficult in the island's interior, Bossert said. ‘I understand the coverage in some cases is giving the appearance we are not moving fast enough,’ Bossert said of the growing criticism of the U.S. response.”
My cherry-picking from Willy B’s post is insufficient. Read it yourselves. It’s short.
It knocked me out. I might have first come across it from Micheal Hudson.
Hi Steve, I love your YouTube videos and your passion for socialism which is contagious and makes your videos riveting. I share your passion for a better society.
Why doesn't the govt just buy up a bunch of surplus 50,000 lb Puerto Rican truck drivers and get it moved out?
Puerto Rico is bankrupt.
The Intercept
Puerto Rican Debt Holders Respond To Catastrophic Hurricane By Offering Puerto Rico More Debt
David Dayen
From Max Sawicky at MaxSpeak:
Maria Update 9/26/
7Maria update. Wednesday 9/2
MRW, the PR situation is imo symbolic of a wider problem with lack of qualified people...
If Trump and his private equity squad think they are going to just throw money at this and it will all go away quickly I do t think their approach is going to work.... may just start a big period of price increases....
He seems a decent guy and his Tedx talk was good which i think they banned. I will try to get in contact him if I can.
Matt Franko
You say: “The govt bond accounting is Cash Basis (see US Daily Treasury Statement) while I don’t think the other terms in your equations are accounted for in Cash Basis ... they are accounted using a Modified Accrual Basis.”
The difference between Cash Basis and Accrual Basis plays no role in the present context. Monetary profit Qm is equal to the increase of the business sector’s deposits at the central bank which, in turn, are equal to the increase of the government sector’s overdrafts at the central bank because both sides of the central bank’s balance sheet are ALWAYS equal (as everyone knows from his accounting course, except Matt Franko). If and when the government consolidates its debt by selling bonds or T-bills or whatever to the business sector is independent of the development of the debt in a certain period. In the present context is important to realize that Public Deficit = Private Profit. It is of NO interest here if and how the deficit = increase in overdrafts is ultimately funded.#1, #2
Needless to emphasize that the household sector will be taxed somewhere in the future in order to pay back the government’s debt. So, the households get their ponies on credit without realizing it while the business sector gets its profit for good. The payback part is entirely missing from the pony story. Stephanie Kelton’s wonderful proposal is like the auto dealer saying I give you this brand new car for free, please confirm my generosity with your signature at the end of this credit agreement.
Stephanie Kelton is a scientifically incompetent economist and MMT is Trump University economics.
Egmont Kakarot-Handtke
#1 Fixing the loanable funds blunder
https://axecorg.blogspot.de/2017/08/fixing-loanable-funds-blunder.html
#2 Reconstructing the Quantity Theory (I)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1895268
Egmont,
The point is, of course, that it does NOT matter much whether (S) comes before (T) or vice versa, this is merely a question of cash management
You’re German and don’t know US law, or its history. You’re just pulling these assumptions out of your ass with the alacrity of having a beer for breakfast. It is NOT “merely a question of cash management.” It is US Treasurylaw. The Treasury cannot have a zero balance in its central bank General Account; it’s in our statutory code from the gold standard years. Therefore, it subsequently sells treasury securities (it creates them out of “thin air”) equal to the amount of the “spending” previously authorized by Congress and the only legal entity authorized to do so—on the open market at a public auction to replenish the General Account.
Our central bank only manages that process for its client the US Treasury. It does not, and may not (by law) participate in those purchases.
Taxes come after the fact in this country. They are not collected beforehand so that the government can spend. Taxes are based on actual income attained. They have nothing whatsoever to do with government spending or the government provisioning itself.
Your knowledge of US federal government and Treasury financial transactions are completely fictional, and a figment of your imagination.
Egmont, your response to Matt Franko at September 30, 2017 at 4:05 PM is illiterate. And for the record, Stephanie Kelton was an accountant before she was an economist...one of the rare ones.
Matt,
If Trump and his private equity squad think they are going to just throw money at this and it will all go away quickly I do t think their approach is going to work.... may just start a big period of price increases....
Matt, first they’ve got to get the lights on, the refrigerators working, the trees off the streets, and the phones back on.
And get the people some food and if they're lucky, air conditioning.
USAToday
Acting DHS Secretary: Puerto Rico's electrical grid 'virtually gone'
Kevin Johnson
LA Times
Puerto Rico's debt-plagued power grid was on life support long before hurricanes wiped it out
Ruben Vives and Molly Hennessy-Fiske
For an in-depth analysis see:
IEEE Spectrum
Logistics Complicate Puerto Rico's Electric Grid Recovery
David Wagman
What they've facing is bad enough, but can you imagine the horror if the island operated on renewables like wind turbines, or had plunked solar panels on their rooftops?
Matt Franko
Each government entity, each firm, and each bank around the world has incoming payments and outgoing payments. These are not synchronized and therefore there is a smart guy, let us call him the cash or liquidity manager, whose task it is to maintain constant financial solvency.
Imagine the following situation. The cash manager knows that the government spends the amount G on ponies on Jan 1 and that taxes T are paid on Dec 31. It holds G=T. So, the cash manager has to take up credit for one year either from the banking system or by selling some short-term paper. Vice versa, the taxes come in on Jan 1 and the ponies are bought on Dec 31. So, the cash manger can buy some ultra-safe paper and hold it for one year. No cash manger in this world has any problem with handling both situations. At the end of the year, both cases amount to the SAME, except for the interest. The cash manager has NO long term financing problem.
Things are different if T is less than G. If this happens year after year government debt increases continuously and the cash manager has to issue government bonds of different maturities and to roll them over again and again. This growing government debt is the problem that alarms people and NOT the bridging of the short term gaps between outgoing payments and incoming taxes.
The obvious mistake of Stephanie Kelton’s op-ed is to confound the two cases of short-term cash deficits and long-term budget deficits.
Why Stephanie Kelton forgets to mention that Public Deficit = Private Profit and that people have to pay for the ponies in the form of deferred budget surpluses which are needed to eventually redeem the accumulated public debt is a bit mysterious. But then, perhaps this is absolutely normal at Trump University.
Egmont Kakarot-Handtke
Egmont,
Each non-US federal government entity, each firm, [household] and each bank around the world is a USD currency user.
One set of rules apply to them.
The US federal government is a currency issuer.
Another set of rules apply to the issuer.
If you can’t deal with this simple fact, then you’re lacking a screw.
Don't engage with the Troll. He's not interested in learning.
You're right, Neil. I'll refrain.
But why is he tolerated? Does Mike not know?
"But the needle doesn't move forward when you promote free ponies or even the idea of free ponies."
Yes it does.
Announce that you will just write out student debt. Permanently and completely. Point out that you can do it simply by moving a few numbers around and nobody loses out other than banks.
That gets votes.
Announce that you will just create single payer health care - like they have in every other civilised country on earth. Point out that you can do that simply by moving numbers around and nobody loses out other than banks.
That gets votes.
Announce that you will ensure everybody has a job, which ensures everybody has to contribute their hours to the furtherance of society. Point out that you can do that simply by moving numbers around and nobody loses out other than banks.
That gets votes.
What MMT shows is that you can create all the free ponies in the world, not by taxing people, but *by restricting what banks can lend money for*. Reduce the leverage in the whirligig financial sector and suddenly you have space to do real stuff.
What the HRC supporting Dems miss is that people want this, once it is pitched in a way that shows that it won't cost them anything and that people won't be getting something for nothing. That's why the Job Guarantee is so important. It ensures reciprocation.
Trump won because there are far too many Dems talking about Black, White and Hispanic rather than Rich and Poor.
In my view, what gets posted where is a matter of strategy. Different audiences respond to different approaches. A large-scale mass-market like the LA Time is obviously different from a progressive economics blog and requires a different approach. There is only one way to know what the effect of a particular tactic is, and that is through testing. This is SOP in advertising, PR, and political strategy.
MMT is economics, finance and policy science. Promoting it is politics and PR. Confusing these is bad strategy.
"I like a lot of MMT’s ideas, but they are totally wrong here."
It's not fudging the accounting. It's using Group accounting. Accounting is hierarchical.
The Central bank and the Treasury of the nation can be consolidated in accounting terms because under FRS10 international accounting standards they are controlled by a common entity - Congress.
If Congress authorises the Spending, then Fed clears the cheques. As Bernanke said on oath "we [The Fed] are the agent, of course, of the Treasury and it's our job to do whatever they tell us to do". There is nobody there who can say 'no' and stop it *and make that stick legally*. In US terms, there is no constitutional bar.
When you run group accounting rules and then look at the group balance sheet dynamically, what you see is that the balance sheet grows as the Whole of Government spends and lends into the economy, and shrinks as the Whole of government taxes and takes repayments.
The problem most people have, and the quoted comment falls into the usual trap, is that they are looking at the trees rather than the wood. There are a lot of processes lower down the hierarchy that look backwards. You can only really work out what is actually happening by looking for the person who gets to say 'no'.
Whichever bank in the system the Treasury banks at becomes the central bank. That's because Treasury can force banks to lend to the Whole of Government sector at a proscribed interest rate. (That's what bank reserves are - forced lending). They cannot say no. That gives the bank assets and liabilities. Those liabilities and assets then get moved around between the other banks, who are forced to peg to the Treasury's bank - because that banks liabilities are the liabilities that get accepted for taxes.
There are two functions to the central bank. One is the clearing function of the private banks, and the other is as the Treasury agent that instigates this forced lending process via the liabilities pegs between the authorised banks.
The process allows lots of people to state silly things - from Cullen's backwards view of taxes to Richard Werner's "Private banks create the money and lend it to government". Both views are illusionary because they infer an individual-bank power relationship where the bank is the one calling the shots. In reality the power relationship is the other way around. In this case the borrower can instruct, by law, the bank to lend money to them at whatever interest rate they choose including zero. And nobody else can stop them.
Egmont, as I have been saying, it is quite clear that you don't understand ("the formal foundations of") MMT, so you are in no position to criticize it. (I do share the feeling that Kelton's ponies are not the best MMT pedagogical tool, though.) For you mistake this or that equation as a "formal foundation", while not grasping the far more fundamental MMT critique. Expanding on MRW's point about issuer vs user:
Your mistaken understanding is on the level of not understanding the Logical signature of economic concepts. To quote Wray, "money is a cross-balance sheet RELATIONSHIP" [my emphasis] (Theoretical computer scientists, among many other academic disciplines are groping toward MMT understanding, by the way. Somewhat in (mutual) ignorance of MMT economists.).
This error leads to an inability to distinguish between (generously speaking) true statements - ones that can be interpreted or translated into true ones like:
Needless to emphasize that the household sector will be taxed somewhere in the future in order to pay back the government’s debt
Not the best way of saying things, but people wouldn't accept the government's money in return for their valuable labor or grain or whatever, if the government didn't give them something valuable by taxing them.
And flatly false ones:
Each government entity, each firm, and each bank around the world has incoming payments and outgoing payments. These are not synchronized and therefore there is a smart guy, let us call him the cash or liquidity manager, whose task it is to maintain constant financial solvency.
This does not apply to governments. Governments do not have incoming and outgoing payments the way the others do (at this level of analysis, in this level of MMT school). The government does not need a cash manager, because the job of the government is to be financially INsolvent. (Roughly & humorously speaking)
Things are different if T is less than G. If this happens year after year government debt increases continuously and the cash manager has to issue government bonds of different maturities and to roll them over again and again.
No. T < G means that government debt increases continually, true. But superfluous or nonexistent cash managers doesn't have to issue any government bonds and roll them over again and again because the issuance of the money is already the issuance of a government bond. Government money and government bonds are one and the same things. Bonds are NOT government debts "for" money. They are both relationships between the private sector and the government.
And worst:
people have to pay for the ponies in the form of deferred budget surpluses which are needed to eventually redeem the accumulated public debt.
Not true. Refuted empirically by the history of every nation in the world. This basically completes the getting-things backwards. Budget surpluses entail the redemption of public debt, but T > G is not needed to redeem public debt, to make public debt valuable. It is very rare that they are a good idea. Deficits are infinitely sustainable, while (bounded below) surpluses are logically impossible to sustain indefinitely - by the high tech math called "division".
Tom:And Soros's INET ain't it, just like the Roosevelt Institute, which the MMT economists abandoned when the Peterson people came in. I thought the MMTers had a mistaken stance then. Taking Peterson money is fine. Use it to subvent the writing of papers detailing the precise errors of Peterson's deficit terrorism & tell Peterson that's what you're doing. Either they will see the light, stranger things have happened, or they will end the relationship.
Neil,
I don’t understand something you wrote above, and would appreciate a quick clarification if you wouldn’t mind. It’s your use of the word “proscribed” in your sentence italicized below. I know the word to mean forbidden or not allowed, condemned, ixnay. Is this what you mean, or does it have a different meaning in England?
That's because Treasury can force banks to lend to the Whole of Government sector at a proscribed interest rate.
Because if this is what your use of proscribed means (meaning the same as I understand it), can you explain it? My understanding is that Treasury can force banks to lend to the Whole of Government sector at an interest rate Treasury dictates and enforces.
Thanks for indulging my quibble.
They say the great professors like Noam Chomsky and Norman Finkelstein are coming to an end too. Everything is being taken over by the mega rich.
HRC and the mainstream Democrats hate the working class, the trade unions, and and the poor. They are social liberals but in every other way they are the lackeys of the ruling elite.
Calgacus
You quote Wray “money is a cross-balance sheet RELATIONSHIP”. Yes, trivially true and known since the Middle Ages, but MMTers are too stupid to do the accounting properly. For the proof see #1, #2.
It is the most remarkable feature of MMT that macro profit does not appear in the balance equations. By consequence, MMTers miss the most important “cross-balance sheet relationship”, that is, Government Deficit = Profit of the business sector. Fact is that MMTers got profit theory wrong and this is disqualifying for every economist.#3
Accounting is elementary mathematics and one needs no Theoretical Computer Scientists to do it. The signature of arithmetic consists of addition, multiplication, and successor function symbols, the equality and less-than relation symbols, and a constant symbol for 0. (Wikipedia) That’s all, but MMTers fail already at the level of elementary logic.
You say “The government does not need a cash manager because the job of the government is to be financially INsolvent.” The cash manager of the government coordinates and bridges the gaps between outgoing and incoming payments. As long as the budget is balanced, i.e. G=T, the job of the government’s cash manager is essentially the same as the non-government’s cash manager. Their deficits = overdrafts at the credit side of the central bank’s balance sheet create uno actu deposits at the debit side = money. The only difference between the non-government cash manager and the government’s cash manger is that the central bank cannot limit the deficit creation = money creation of the latter. The point is, though, that the newly created money lands one-to-one as profit on the accounts of the business sector. Take all the technicalities of cash management away then MMT’s pony program turns out to be a profit booster program. It seems that some Wall Street folks understand this better than Stephanie Kelton.
At the end of the whole exercise, a sub-group of the general public is left with some ponies and all of the general public is indirectly left with the government’s debt. Whether the debt takes the form of overdrafts-deposits (= money) at the central bank or assets-liabilities in the form of bonds is a separate issue. Overdrafts-deposits (= money) is the most convenient and cheapest form of government debt.
The accumulated debt can be carried over for an indefinite time but this makes it only invisible but not to disappear. The household sector is ― indirectly via the government ― left with the debt and the business sector is left with profit which is held either in cash = deposits at the central bank/banking sector or in government paper. Government paper is Triple-A quality and carries interest which makes the folks in the business/banking sector even happier.
As long as the debt is revolved, all is fine. Interest for the public debt is reliably taken from the household sector and transferred to the bond holding business/banking sector. But the market economy breaks down as soon as the household sector starts to redeem private or/and public debt, which must happen eventually because this is the very Nature of debt.#4
What Stephanie Kelton is ― knowingly or unknowingly does not matter ― actually doing under the banner of social programs is to boost the profit of the business/banking sector and to postpone the breakdown of the economy. In political terms, this is what the MMT dog & pony act in the LA Times is all about. MMT is just another example for the scientifically degenerate state of economics.
Egmont Kakarot-Handtke
#1 Rectification of MMT macro accounting
https://axecorg.blogspot.de/2017/09/rectification-of-mmt-macro-accounting.html
#2 A tale of three accountants
http://axecorg.blogspot.de/2017/07/a-tale-of-three-accountants.html
#3 Why economists don’t know what profit is
https://axecorg.blogspot.de/2017/09/why-economists-dont-know-what-profit-is.html
#4 Mathematical Proof of the Breakdown of Capitalism
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2375578
G-T does not equal the net amount of Treasuries issued...
G is Accrual and T is Accrual... Treasury issuance is Cash...
So you have to measure your "G" and your "T" yourself also in Cash.... iow you just can't take the numbers from the system of national accounts reporting and plug hem in your equations... you have to measure/record them yourself via a cash basis process...
I assume the SNA uses modified Accrual...
Tom:And Soros's INET ain't it, just like the Roosevelt Institute, which the MMT economists abandoned when the Peterson people came in. I thought the MMTers had a mistaken stance then. Taking Peterson money is fine. Use it to subvent the writing of papers detailing the precise errors of Peterson's deficit terrorism & tell Peterson that's what you're doing. Either they will see the light, stranger things have happened, or they will end the relationship.
It's a strategic decision. At time, Bill Mitchell led the charge to dissociate MMT completely from the Peterson Institute, which mean that either the Roosevelt Institute had to drop Peterson, or the MMT folks would leave. The latter happened.
I think it was the right decision, but that is a matter for debate.
Even more extreme is the choice to dissociate MMT from other schools of economics, not formally, since MMT draws on other schools and acknowledges it, but rather socially by emphasizing its uniqueness relative to other schools, along with the claim that MMT alone has the foundations of the discipline of combined finance and economics right.
That, too, I think is a good strategic move. But it leads to the countercharge that MMT is a "cult." I think that can be overcome fairly easily by showing success in relation to others.
The important point here, as Scott has emphasized, is that these are matters of strategy and should not be equated or conflated with the discipline itself or confusion will result.
Strategy and tactics are about presenting MMT effectively in order to shift the foundations of the universe of discourse not only in economics and finance, but also in policy science and economic sociology to the degree that they are based on microfoundations, equilibrium, and rational choice theory, for example. The end in view is shifting the political debate away from assumptions that have no solid foundation in reality either operationally or institutionally.
We talking about the most effective and efficient way of imposing a new paradigm, which is also the intent of INET, but most of them are still lost in the weeds and those that may get MMT are still not willing to get behind it publicly and push it.
I am open for a debate about strategy and think that it's now something that MMT advocates need to be engaged in now that MMT is getting some traction.
@MRW
I don't understand something you wrote above, and would appreciate a quick clarification if you wouldn't mind. It's your use of the word "proscribed" in your sentence italicized below
Typo. Should be "prescribed."
Egmont these MMT elites are hardly shills for the business sector lol....
" the problem is the lack of trucks and truck drivers. "
I knew it... munnie won't solve it either... though it will probably be tried....
Thanks, Tom.
”munnie won't solve it either”
Oh yeah it will. They have to fly cash in because the banks can’t get electronic transfers and the ATM machines don’t work. No electricity!
Matt Franko
You say: “G-T does not equal the net amount of Treasuries issued... G is Accrual and T is Accrual... Treasury issuance is Cash...”
Roughly speaking, G and T are the sums of transactions that take place during one period on the Income Statement/Profit-Loss Accounts, while the buying and selling of government securities are transactions that are recorded on the balance sheet.
G and T are flows, while cash and the amounts of diverse government securities are stocks. The difference of flows Δ=G-T of the government sector changes the stock of money by Δ.
All this has NOTHING to do with the difference between Accrual Basis and Cash Basis Accounting. For the interrelationship between macro flows, their balances, and stocks see #1, #2. For the basics of National Accounting see Wikipedia.#3
Egmont Kakarot-Handtke
#1 Essentials of Constructive Heterodoxy: Money, Credit, Interest
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2569663
#2 Essentials of Constructive Heterodoxy: Financial Markets
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2607032
#3 Wikipedia “National accounts broadly present output, expenditure, and income activities of the economic actors (households, corporations, government) in an economy, including their relations with other countries’ economies, and their wealth (net worth). They present both flows (measured over a period) and stocks (measured at the end of a period), ensuring that the flows are reconciled with the stocks.”
https://en.wikipedia.org/wiki/National_accounts
Neil,
Let's talk about "Cullen's backward views" for a second because I often see you project your feelings about who I am and what I know. For instance, like above when you said that I assume private sector spending is necessarily productive. I have literally never said this in my whole damn life. I wrote an entire section in my book describing how the "free market" cannot solve all of our problems because capitalists, in their process of spending, often make huge mistakes. I don't know why you said this. Lying about who I am or what I believe does not advance your message because it is so easy to debunk statements like this which you didn't bother to verify in advance.
Anyhow, I think you misunderstand the Trump movement. Liberals want to make it about race and sex because those are divisive issues that rally their base. But that's not why Trump won. Trump won because he had a consistent (albeit incoherent and incorrect) economic message. Bernie lost because he promised free ponies and most Americans don't actually want some old dude from Vermont telling them what they should and should not get. HRC lost because she had no economic message at all. She couldn't figure out if she wanted to hug up to Goldman Sachs or the poor.
Trump, on the other hand, was only talking about money. The guy can't think about anything else after all. Well, except maybe grabbing p$ssy with his tiny little hands. Asshole. He said he will cut taxes, bring back jobs, make America first. This is all a money message. That's all. It's full of empty promises, but it resonated with a lot of people because they think money will solve all of their problems.
Unfortunately, the left's problem is that they are tone deaf to the needs and wants of the right. HRC had no idea how to talk to a Conservative crowd. It was infuriating to watch because she was so much more qualified for the job that it's a joke. IMO, the Kelton piece on ponies is tone deaf in the same destructive way that HRC's message was. Sorry, but that's just my opinion.
Lastly, on the reserve stuff. Look, there is nothing I misunderstand there. Not one single thing. And I think you step into a big can of worms when you say things like "Whichever bank in the system the Treasury banks at becomes the central bank." Legally, this statement is just wrong. JP Morgan is not a government entity no matter how many banking licenses or reserve accounts it has. Your statement might be kinda right, but it's mostly wrong from a legal perspective. And the fact that the Fed sets overnight rates does not mean that taxes destroy money. No, deficits increase the quantity of financial assets. Surpluses destroy them. And taxes simply redistribute money using the same payment clearing process that all payments use. Can you say "taxes sometimes create money (T-Bonds)?" Or "spending sometimes destroys money (T-Bonds)?" Yes. 100%. But it is inaccurate to make the sweeping generalization that taxes destroy money or spending creates money. Just like it is inaccurate to call JP Morgan a central bank just because it has a reserve account, TGA and rents a banking license. I think there's some overreach there that creates internal inconsistencies across other parts of the operational narrative.
It's a bummer that we disagree and that there are still so many personal comments slinging around. Oh well. Maybe there's some solace in the fact that we all seem to think Trump is a raging asshole on a fast golf cart to hell?
re: Tom at October 1, 2017 at 9:27 AM
I think MMT is crazy to identify with any politics, and esp. the ‘progressive’ persuasion.
The very smart thing, IMO, that Warren always ALWAYS did from the beginning was to specify that what you did with MMT operational and transactional truths would vary “depending on your politics.”
(Don’t forget, Warren ran as a Tea Partier, an Independent, and a Democrat.)
MMT should appeal to Glenn Beck and all conservative Republicans with just as much respect as it appeals to the choir they now preach to on neweconomicperspectives, which is why I can’t stomach going to that site anymore.
I think tying MMT principles to any political school of thought is fucking suicide. Not to mention boring.
MMT is absolutely ripe for Trumpers to believe in and take up the cause for. Because it can skewer just the group that has caused this group the economic pain Democrats refused to take seriously and that the majority Republican leadership (McConnell, Ryan) didn’t take responsibility for causing in the first place: CONGRESS.
So what do MMT proponents mewl about instead? Fucking progressive politics or climate change. Or take pride in themselves in being Trump-haters like Hillary ‘Norma Desmond’ Clinton or that Roche guy who shows up here periodically to defend his reputation (like we care, he has his own website to use for that).
MMT info should be on Fox News every night, but the poobahs that could pull this off don’t see that.
OH! I see Mr. Roche is baaaaack.
Let's play nice.
@ MRW
As you point out, MMT's operational description is independent of ideology.
Scientific theory should be.
Macroeconomics is not science but a policy "science" owing to the role of government, so ideology, politics, law, etc. are necessarily involved and those are normative as well as positive. There is no way around this other than by pretending.
This is the problem with conventional macro as a "science." it is a pretense based on the assumption that there is no such thing as society, only individuals and aggregations. This ignores the obvious fact that an economy is embedded in a social system in which the relationship of elements, subsystems and system as a whole is as important as the elements (individual agents), if not more important.
Ignoring this is just pretend economics that ends up being junk economics (Michael Hudson).
As a macro theory and policy science, MMT is Marxian, institutionalist, Keynesian/Post Keynesian in terms of the influence it draws upon and it is also a unique approach that claims to resolve the trifecta of optimal growth, actually full employment, and moderate inflation. As such, it is ideologically on the left. All MMT economists that I am aware of anyway are "leftists" in that they prioritize full employment.
Everyone should adopt the MMT operational analysis to the degree it is correct. There's almost nothing that can't be improved upon.
Then there could be actual debate about real issues — how to allocate real resources in the present and prepare for the future — instead of the ignorance, persuasion, pretense, etc, that presently exists in macroeconomics, policy studies, and politics. There could also be honest debate also instead of the posturing and misrepresentation that goes on now, while in the background lobbyists write the policy and pay to have it passed.
Different views on the left could then compete on the battlefield of ideas, while different schools of thought could compete with each other on both left and right. Now it is basically all BS. Yes, even Bernie, who is apparently also clueless, even though he had "MMT rockstar" Stephanie Kelton advising him.
That's OK to a degree in Bernie's case since it turned Stephanie into a superstar and got a lot of free publicity for MMT.
I don't disagree with you Tom. I just don't think that prioritizing full employment is a lefty idea (nor a right-wingy one either, for that matter). And I resist (and resent) putting that label on it. It’s a shackle. And it makes political what should be a societal value.
You can call me Horatio Algerish, but where Warren Mosler sold me was the concept of public purpose. I had already been sold in November 1994 after watching Sir James Goldsmith’s riveting and extraordinarily prescient interview with Charlie Rose (still on youtube and still highly relevant) on the purpose of the economy. It was to serve society and “not financial indices.”
A billionaire who made a lot of sense and who was fighting what Clinton’s minions—namely the odious Rahm Emanuel—were doing pushing through GATT then in South America on a ‘fast track’.
_______________________________________
OK. Here’s the Goldsmith interview. Just watch the opening 8-10 minutes if all any of you have the time for. Worth sitting through the middle 15 minutes with Clinton’s boring economic council head making arguments that turned out to be so wrong years later. So were Charlie Rose’s assumptions that GATT would open China’s markets to buy US imports. Ha! The arrogance. The latter portion on his colorful personal life is a hoot.
https://www.youtube.com/watch?v=wwmOkaKh3-s
I don't disagree with you Tom. I just don't think that prioritizing full employment is a lefty idea (nor a right-wingy one either, for that matter). And I resist (and resent) putting that label on it. It’s a shackle. And it makes political what should be a societal value.
Prioritizing actual full employment is different from prioritizing "full employment" and using unemployment as a policy tool.
I don't know of any study that compares prioritizing growth, full employment and price stability.
Anecdotally from my own experience, those that put full employment at the top are all on the left and those that put either growth or price stability at the top tend to be right.
Complicating this is that a lot people that prioritize "jobs" vote right, either because they think that the right supports "job creators," or they prioritize factors other than economics. Also curious is that lot of working people are anti-union.
The views and stance of MMT economists are not likely to change, so there's not much value in debating the merits of it.
I would actually like to see them cut to the chase and call a spade a spade, addressing "capitalism" as bourgeois economic liberalism as the problem and showing that it cannot be reformed since it is based on rent extraction. It needs to be overhauled.
MMT: Just political heat, no scientific light
Comment on Stephanie Kelton/Op-Ed on ‘Congress can give every American a pony (if it breeds enough ponies)’
The selling proposition of MMT is that the government can solve all economic problems because as sovereign currency issuer it is not financially in any way restricted. In other words, in contradistinction to the private households or firms, the government can run deficits without any risk of going bankrupt. This is true in principle but leads to some unintended consequences which are due to the fact that MMTers do not know how the economy works. In other words MMTers lack the true economic theory. This is rather bad for people who claim to be scientists: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)
What the layperson cannot see is that MMT has NO sound scientific foundations. The MMT policy proposals are based on Keynesian macro which has been refuted long ago.#1
As the correct analytical starting point, the pure production-consumption economy is defined with this set of macro axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.
Under the conditions of market clearing X=O and budget balancing C=Yw the price is given by P=C/X=W/R, i.e. the market clearing price is in the initial period equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand. For the graphical representation see Figure 1.#2
Monetary profit for the economy as a whole is defined as Qm≡C−Yw and monetary saving as Sm≡Yw−C. It always holds Qm+Sm=0, in other words, the business sector’s surplus = profit (deficit = loss) equals the household sector’s deficit = dissaving (surplus = saving). This is the most elementary form of the Profit Law. Under the condition of budget balancing, total monetary profit is zero.
Now, the sovereign government decides that in the next period wage income is taxed and that a certain number of hitherto unemployed are taken into a Job Guarantee Program. So, net wage income is now Yw−T and the hitherto unemployed receive the transfer income Yt. Total income is Y1=(Yw−T)+Yt and if the government’s budget is balanced, i.e. T=Yt, then total income does not change, it is only redistributed. Under the condition of budget balancing C1=Y1=Y, consumption expenditures remain unchanged and so does the market clearing price P1=C1/X=W/R=P. What changes is the distribution of output O. The real share of wage income receivers is Ow1=(Yw−T)/P and those of Job Guarantee participants is Ot=Yt/P. So, what is achieved with the income redistribution is a proportional output redistribution.
MMTers maintain that for the sovereign government there is no need to balance the budget and they propose a tax reduction for the wage income receivers. Under the condition T=0 total income changes from Y1=(Yw-T)+Yt to Y2=Yw+Yt. The amount Yt = government budget deficit comes from the central bank, i.e. is created out of nothing. Under the condition of C2=Y2 consumption expenditures rise with total income. This leads to an increase of the market clearing price P2=C2/X=C2/O. This, in turn, reduces the share of real output for the wage income receivers from Ow=Yw/P in the initial period to Ow2=Yw/P2.
See Part 2
Part 2
In the MMT variant, the wage income receivers are now taxed via the price increase. In real terms Ow1=(Yw−T)/P compares to Ow2=Yw/P2. Let us assume for simplicity that both variants lead to the same outcome, i.e. Ow1=Ow2. Hence in real terms, the wage income receivers do not benefit from the tax reduction.
The profit of the business sector was zero in the initial period, i.e. Qm=C−Yw=0 because of C=Yw, and is now positive Qm2=C2−Yw=Yt because of C2=Yw+Yt. So, the identical real redistribution creates a profit for the business sector. It always holds Public Deficit = Private Profit.
This can go on for an indefinite time with public debt vis-a-vis the central bank rising continuously and with the business sector’s pile of cash rising continuously and with no inflation. As long as the debt is revolved, all is fine. Interest for the public debt is reliably taken from the household sector via taxes and transferred to the bond holding business/banking sector. This is an additional benefit for the one-percenters of the MMT way of doing things.
Compared to the redistribution via a balanced budget the same real redistribution via budget deficits has only the optical advantage of T=0 for the wage income recipients yet palatable and long-lasting advantages for the one-percenters in the form of higher profits and subsequent interest incomes.
The snag of the MMT policy agenda is that it simply shifts taxes into the indefinite future. Those people who suspect that the MMT economic policy agenda is too good to be true have fine instincts. MMT is not a new economic school with a superior problem-solving capacity. Instead ― intended or unintended does not matter ― scientifically retarded MMTers actually do the PR for the economic policy agenda of the one-percenters.
Egmont Kakarot-Handtke
#1 For the full-spectrum refutation of MMT see cross-references
http://axecorg.blogspot.de/2017/07/mmt-cross-references.html
#2 Wikimedia, Pure production-consumption economy
https://commons.wikimedia.org/wiki/File:AXEC31.png
Why is this Egmont fellow so obsessed with MMT?
EKH:You quote Wray “money is a cross-balance sheet RELATIONSHIP”. Yes, trivially true and known since the Middle Ages, but MMTers are too stupid to do the accounting properly.
Known since the middle ages? Reference please.
The leading medieval contribution was due to Nicole Oresme, a very great thinker who invented graphs, fractional powers and anticipated Poincare's idea of structural stability. He also originated the commodity theory of money, which is mainly wrong; MMT is based on the credit/state theory: Money is a relation, any credit/debt relation, which is treated as a thing, a commodity (which is what Oresme got right). That is what negotiability, transferability means; money is precisely "negotiable credit" (credit commodified) and nothing else. And the usual basic money, the most negotiable, the moniest money, is state money. (Central bank money is one step below state money, if you hurt your brain by distinguishing them by the way - another area where I believe you follow a mainstream error of holding the reverse.)
Although it had antecedents of course, the first complete, completely clear and correct & of course "trivial" statements are from Alfred Mitchell-Innes. In the 19th century, Fichte, McLeod, Marx, Knapp etc came very, very close at times as did many predecessors, some medieval, but not quite there, not always right-on-the-nose.
Speaking of "trivial" or "trivially true" solely as criticism bespeaks unfamiliarity of mathematical modes of thought. To quote, from memory, Andre Weil, "'trivial' does not mean 'obvious', as all mathematicians know". The truly greatest mathematical or scientific achievements - are trivialities. Which are not obvious until someone thinks them.
Computer science in education today plays a similar role to Euclid for millennia - providing intellectual rigor and discipline. If your program doesn't work when you type it in to the mindless computer, if you can't write a two-column proof giving the moronic trivial reason why each step follows from previous ones, your great ideas are not entirely matured. Similar rigor is provided by experiment or practice in science.
The obvious mistake of Stephanie Kelton’s op-ed is to confound the two cases of short-term cash deficits and long-term budget deficits.
Your mistakes are seeing a nonexistent difference between short & long-term here, and caring crazily about deficits, imagining negative effects on no logical basis, which aren't even actually described sufficiently and which are not observed in practice. The government "cash manager" is utterly unnecessary. The central bank is utterly unnecessary. They don't really do anything. Get rid of them. The US has at times.
Again, the function of a "government cash manager" is roughly to do the opposite of what you assert. So it is best performed to a very good first approximation by nobody and nothing at all- Wray says "a chimp or a robot". Rather milder on "government cash managers" than Andrew Jackson, who called them "a den of vipers and thieves. I have determined to rout you out, and by the Eternal, I will rout you out!"
These errors are due like all errors to not subjecting ones thought to discipline like mathematical proof, the discipline of writing programs that work or of testing theory by experiments. Another mistake is in debating technique - if you want to say MMT is wrong, you have to quote an MMT statement, try to read it as the author meant, and show that it is wrong by logic, leads to a conclusion universally held to be wrong. Quotations and citations are not optional, but necessary to rigorous debate. In short, stop going too fast. Speak to me as if I am an idiot. I do not mind. Festina lente.
(1/2)
(2/2)
Belittling "trivial" ideas and ignoring the slow and careful reasoning they allow leads to intelligent people like you making flatly false, indeed absurd statements like "budget surpluses are needed to pay off earlier deficits." Do you really believe this? It is like insisting that ones proof that heavier-than-air flight is physically impossible is correct, in a world of birds, bees and airplanes. In reality, budget deficits are usually "needed" to repair the damage (across the board, but of course primarily to the poorer) due to budget surpluses or balanced budgets. The normal practical optimum is what was seen in the postwar era - small but mostly continual budget deficits. That's what MMT recommends, that yields the smallest welfare for the rich, social & economic justice to the rest.
Your mistakes on profit are two: (a) that MMT disagrees with you about profits. As far as I understand you, it doesn't. MMT is just more concise. (b) That this agreed on conclusion is in some way a BAD THING. A false conclusion that MMT does not leap to. Yes, the household sector can become increasingly in debt (indirectly, via public debt, a bad way to think of things, but I understand you) to the business sector - by their holding of government cash. But what counts is not absolute debt amounts, but their size relative to ability to "pay".
What is strange and new is that you even seem to recognize all this when you say: "This can go on for an indefinite time with public debt vis-a-vis the central bank rising continuously and with the business sector’s pile of cash rising continuously and with the number of ponies rising continuously and with price stability. Quite obviously, nobody has any reason to complain."
You seem to be taking the MMT position here against your own usual position! With no indication of sarcasm, nor the slightest hint of any error above, rightly, for there isn't any.
When MMT policies are implemented, as they basically were worldwide in the postwar era, from 1933 on in the USA, then one gets all those good things you list above for everyone, PLUS rising equality, PLUS declining household sector indebtedness, maybe even the poor old business sector, the 1%ers, seeing a Marxian declining rate of profit. As the $ amount of public debt and the usual deficits went up in the USA & elsewhere, public indebtedness and "the debt burden" went down, when measured the usual way, a very, very rough measure of "ability to pay" (without inflation or anything not cricket) - debt/GDP. This was understood in theory by Evsey Domar & many others before, during and after it happened in practice. So just what reason IS there to complain? I've never seen you say just what it is.
Of course MMT can be seen as a profit program for the top 1%ers. It'll make everybody better off. Is it a secret that the top 1% will always have more money, wealth or income than the next 1%, than the next etc down the line? Lake Woebegone, where everybody is above average is supposed to be a joke, not a goal. Are you complaining that MMT doesn't do logically impossible things? Are you complaining that it is not a program to put out only one of your eyes, as long as both of your neighbors eyes are put out?
Is it really such a bad world if the richest girl in the world has 11 ponies while the poorest one has only 9? Compared to a world where the richest girl has only 10 ponies, but is taught by her parents to use them to trample down the vast poor and poniless majority every day?
Quick comments on EKH's last salvo:
As long as the debt is revolved, all is fine. Interest for the public debt is reliably taken from the household sector via taxes and transferred to the bond holding business/banking sector. This is an additional benefit for the one-percenters of the MMT way of doing things. This is not the MMT way of doing things. The MMT way is ZIRP. No bonds. No debt (according to a wrong manner of speaking). No interest paid "to the bond holding business/banking sector". A point I neglected above - it is always not really legitimate to say money taken by taxes is given to somebody else, but it can have some meaning at full employment. Below full employment, which you aren't going to get without MMT, it is nonsense to speak of "transfer". As always, as needs to be noted incessantly, bad mainstream arguments depend on invalid full employment assumptions.
Compared to the redistribution via a balanced budget the same real redistribution via budget deficits MMT / Keynes is not about "redistribution" but about predistribution about allowing people to increase production for themselves and others. MMT/ Keynesian policy IS a free lunch, compared to mainstream, compared to balanced budget mania, because it is about not destroying the lunch you already have.
The snag of the MMT policy agenda is that it simply shifts taxes into the indefinite future. This is always where they were. It is logically impossible that they be anywhere else. That's the meaning of credit, of money. It's always in the future. That's why Commons discussed creditary theory under the heading of "futurity."
To enlarge on a point I made above. The effect of MMT deficit owl policy in practice has been to shrink the length in the future for the taxes, not to increase it, as you may think, relative to the balanced budget deficit-terror policy. Deficit or debt to GDP ratios are in units of years. As they shrank in the postwar era, so did the time from debt issuance to payment.
In other words: "Functional finance is sounder than sound finance". EKH balanced budget proposals being a species of sound finance. "Take care of the employment, and the budget will take care of itself."
Questions - are you for full employment? Do you have a plan to achieve it? Do you think it is automatic or natural in a monetary economy? (Ha!) Do you think it is achievable with balanced budgets? Why? Which is a more important, morally important goal - what is on your political agenda - numerological obsession with balanced budgets (for obscure reasons) or achieving 100% employment?
Calgacus
(i) I interpreted Wray’s statement “money is a cross-balance sheet RELATIONSHIP” as a reference to the development of double-entry bookkeeping in medieval Europe. If the credits for the correct definition of money go actually to Mitchell-Innes I appreciate your clarification.
(ii) You say: “Computer science in education today plays a similar role to Euclid for millennia ― providing intellectual rigor and discipline.” I fully agree as you could infer from the fact that I strictly apply the axiomatic-deductive method.#1
(iii) You say: “These errors are due like all errors to not subjecting ones thought to discipline like mathematical proof, the discipline of writing programs that work or of testing theory by experiments. Another mistake is in debating technique ― if you want to say MMT is wrong, you have to quote an MMT statement, try to read it as the author meant, and show that it is wrong by logic, leads to a conclusion universally held to be wrong.”
I agree. From the fact that you obviously have not realized that the proofs have already been given#2,#3 I conclude that you do not heed your own advice. Take notice that it is proven that MMT is axiomatically false. Because the foundational premises of MMT are false the whole analytical superstructure is false. MMT is scientifically worthless.#4
(iv) You say: the lack of slow and careful reasoning leads to making flatly false, indeed absurd statements like ‘budget surpluses are needed to pay off earlier deficits.’ Do you really believe this?” This is not a question of belief but of logic. Money is a credit relationship, a generalized IOU that is continuously created and destroyed. If the government runs a deficit in period 1 this takes the form of overdrafts on the asset side of the balance sheet of the central bank and of deposits = money on the liability side. This is the creatio-ex-nihilo step. Being a credit relationship there must LOGICALLY be the inverse operation. Practically, the government can redeem its overdrafts at the central bank if it taxes the household sector, that is by running a budget surplus. What government can also practically do, though, is to indefinitely postpone the logically inverse operation to money creation. It is self-contradictory of MMTers to say money is basically an IOU without taking into consideration that IOU’s have to be redeemed in finite time. Practically, this has NOT been done, of course, and the proof is in the continuously growing public debt. But logically it has to be done. It is one of the political dishonesties of MMT to assert that money is a debt that has never been paid back and never will. Money that is created by government deficits has eventually to be destroyed by government surpluses. What we have historically seen is only the first part of the whole story. Note that this is NOT an obsession with balanced budgets but follows logically from the concept of money as a credit relationship. If it is credit it has to be paid back eventually. But logic has never been the strong point of MMT.
See Part 2
Part 2
(v) As my example above shows, MMT policy makes the household sector WORSE off. In real terms, the wage income receivers’ part of output is reduced in period 1 and it does NOT matter whether this happens via a tax or via a price increase. But with immediate taxation the matter is settled in real AND financial terms in period 1. With government deficit spending the matter is NOT settled. The wage income receivers have to pay via taxes the interest for the government debt as long as it is revolved. The government taxes on behalf of the business sector who holds part or all of the government debt in the form of securities. Ultimately, the household sector has to pay the tax because the government debt has eventually be redeemed. MMT policy simply amounts to a tax deference program with income redistribution via interest over a very long time. Seen from beginning to the logical end, MMT policy makes the household sector worse off. ALL benefits are clearly on side of the business sector. To sell MMT as a social program to Sanders/Corbin is either self-deceptive stupidity or a fraud.
(vi) Deficit spending is since Keynes the main cause of the accelerating income redistribution.#5
(vii) MMT is simply the wrong way to boost employment and to realize all the other social improvements MMT claims to bring. For the correct macro employment theory see #6.
(viii) Stated MMT policy goals are one thing. They are NOT the issue here. The point is that MMT policy guidance has no sound scientific foundations. MMT economic theory is axiomatically false. Scientifically, MMT is not different from the flat earth theory. MMT has NO truth value, only some political use value. All poofs can be found in #4.
Time for all MMTers to stop blathering and advancing the cause of the one-percenters under a social pretext and finally to do their scientific homework.
Egmont Kakarot-Handtke
#1 From Marshall to Georgescu-Roegen
https://axecorg.blogspot.de/2014/12/from-marshall-to-georgescu-roegen.html
#2 Rectification of MMT macro accounting
https://axecorg.blogspot.de/2017/09/rectification-of-mmt-macro-accounting.html
#3 Solving Mill’s starting problem
https://axecorg.blogspot.de/2017/09/solving-mills-starting-problem.html
#4 For details of the big picture see cross-references MMT
http://axecorg.blogspot.de/2017/07/mmt-cross-references.html
#5 Keynesianism as ultimate profit machine
http://axecorg.blogspot.de/2015/07/keynesianism-as-ultimate-profit-machine.html
#6 Macrofounded labor market theory
https://axecorg.blogspot.de/2017/07/macrofounded-labor-market-theory.html
Look at the Puerto Rico situation caught short of qualified critical civil defense and disaster recovery personnel in light of the Job Guaranty .... you could employ unemployed people in Training for civil response/disaster recovery and never train enough people for the surges required in a situation like this...
It will be a while before this becomes clear, but at the moment PR looks like a war zone and that is a very difficult situation to deal with even with committing all resources available when the resources are considerable, based on what the general in charge is saying on the ground there.
It looks like the response may have been tardy but apparently no one foresaw the amount of damage that was possible from a storm like this.
Sure, things could have been done better, they always can in hindsight, but this really seems to be unprecedented.
Trump has really blown it personally in his handling of the public relations — basically has shot himself in the foot and made the whole operation look bad.
Egmont, your fundamental flaw is your assumption that central government debt will eventually need to be paid off at some point. You compound your flaw by assuming that when that debt comes due it will be paid by household taxes. Simply, that's wrong.
What you do get correct is the potential consequence of price increases from increased deficit spending. Congratulations, you have discovered MMT's inflationary constraint - you just go about it an ego-stroking convoluted manner that makes people tune you out, and thereby your contribution to the field will be about nil.
All Cullen is noting is that on the gradient of productive to non-productive deficit spending, non-productive spending gets you faster to the inflationary constraint, whether that is isolated to a particular segment (e.g. ponies, health care, education) or more broadly throughout the economy depends on the scope and scale of the deficit expenditures.
Every MMTer will spend substantial energy chastising federal debt/deficit hysteria and the budget constraint mythology, but give only lip service to the inflationary constraint (Cullen, at least, raises the non-productive spending aspect). What most will say is that they are just economists, or that MMT needs to be pure, an operational description, a school of economic thought; must remain aloof of policy and politics; that deciding how to operationalize the inflationary constraint to avoid hyperinflation is a job for some one else.
I think the public, and even most politicans, have an intuitive sense that there is no "free money" - they might not go through your gyrations of calculations, but they know something is not right about free ponies for everyone, or cut every tax the Right can find, or throw money at every problem the Dems can find. Until MMT can come up with a sell-able operational mechanism to impose the inflationary constraint,they will go unheeded, and I will thank the stars that the only currently operational inflationary constraint, debt/deficit hysteria, more or less constrains.
Virtually all economists admit that capitalist production runs off investment.
Conventional economists fall into the trap of assuming that saving funds investment based on the false assumption financial intermediation and loanable funds. MMT corrects that misunderstanding arising from failure to understand operations correctly.
There is little argument over the generality that interest rates influence investment.
Conventional economists fall into the trap of falsely assuming that market set interest rates and that public deficits crowd out investment in competition for loanable funds. MMT also corrects this misunderstanding.
MMT holds that an important tool for way optimizing productive investment and reduce financial rents is for the currency monopolist to set the base rate to zero and not to issue public debt other than very short term debt that is effectively equivalent to cash.
That necessitates abandoning the course of using monetary policy to control inflation by raising the interest rate in order to cool inflation by reducing wage pressure. The existing policy is to use interest rate setting in order to generate unemployment to target the rate of change of the price level by controlling firms' wage bill.
People criticize specific points about MMT without understanding how everything fits together in the macro theory. In order to resolve the trifecta of growth, employment, and price stability, the whole theory has to be implemented.
When asked if MMT recommendation could be adopted effectively without also implementing the JG, Warren responded in effect, Sure, but don't blame the theory if inflation results.
As Warren also points out, there is always some price anchor in a monetary production economy. Under a gold standard it is the fixed rate. Under NAIRU it is the imputed but unobservable "natural rate." Under the MMT JG the price anchor is what the government is willing to compensate for a specified period of unskilled labor.
Critics claim that a JG is not an effective price anchor. They should show then that the natural rate that NAIRU assumes is. Evidence appears to contest that. Or they should argue for another price anchor like a return to gold. Then the tradeoffs involved with that policy can be debated.
Optimizing growth, running actual full employment less transitional, and keeping inflation moderate is a balancing act. Jugglers need all their faculties in order to juggle knives successfully.
MMT has puts an alternative on the table to a system that is working well only for a relatively small percentage of the population in nations and the global economy under the present policy regime, which can be broadly characterized as neoliberal and based on neoclassical economic analysis and assumptions.
What other alternatives are available? What are the likely tradeoffs? What are the foreseeable opportunities and challenges?
Salsabob
(i) You say: “What you do get correct is the potential consequence of price increases from increased deficit spending. Congratulations, you have discovered MMT’s inflationary constraint …”
There is NO such thing as an inflationary constraint. Both Orthodoxy AND MMT get the inflation issue wrong.#1 Both Orthodoxy AND MMT is proto-scientific garbage. Both Orthodoxy AND MMT is refuted according to the scientific standards of material and formal consistency.
(ii) You say: “Every MMTer will spend substantial energy chastising federal debt/deficit hysteria and the budget constraint mythology, but give only lip service to the inflationary constraint…. What most will say is that they are just economists, or that MMT needs to be pure, an operational description, a school of economic thought; must remain aloof of policy and politics …”
There is political economics and theoretical economics. The main differences are: (a) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (b) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.#2
Theoretical economics (= science) has been body-snatched by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the past 200+ years. MMT is part of political economics. More precisely, MMT advances the cause of the one-percenters under various populist social pretexts of which Stephanie Kelton’s ‘Pony for every American’ is the most recent example. MMT policy proposals have NO scientific foundations at all.#2
(iii) MMT is scientifically unacceptable. MMTers are scientifically incompetent. MMT is refuted on all counts.#3 The only thing MMTers can do for human progress is to get out of the way.
Egmont Kakarot-Handtke
#1 MMT was right all along: Gov-Deficits do NOT cause inflation
http://axecorg.blogspot.de/2017/10/mmt-was-always-right-gov-deficits-do.html
#2 MMT: scientific incompetence or political fraud?
http://axecorg.blogspot.de/2017/09/mmt-scientific-incompetence-or.html
#3 For details see cross-references MMT
http://axecorg.blogspot.de/2017/07/mmt-cross-references.html
Egmont, your analysis is steady-state perturbations - existing levels of deficit spending are perturbed with an increase in deficit spending, and a new steady state is achieved,.... and all is well again. Inflation don't play that.
Take some calculus classes.
TH said - "Optimizing growth, running actual full employment less transitional, and keeping inflation moderate is a balancing act. Jugglers need all their faculties in order to juggle knives successfully."
Yes, well said.
Moving further, however -
How many steps are there currently between linking unemployment to direct Congressional actions? How many other players (e.g. FED monetary policy) can be linked (i.e. blamed)?
With JG, as a "price anchor," the link between one's job/wages and how a Congressional critter votes would be glaringly obvious. Do you know a Senator/Representative that is dying to sign up for that?
Perhaps the best productive tax cut to spur the economy would be the payroll taxes, no? But it's mirror image, the best productive tax increase to tame inflation would be the payroll taxes, yes? Just imagine what today's Congressional critters would do in the latter situation.
Is there way to operationalize the inflationary constraint in today or tomorrow's reality?
The constraint of deficit hysteria might just be the best pragmatic one available for some time to come, no?
The constraint of deficit hysteria might just be the best pragmatic one available for some time to come, no?
1. A fundamental flaw with using deficit hysteria and debt phobia to bridle politicians is that this is already in place and the result is "bad deficits" (those that don't address social issues like chronic unemployment and growing asymmetry) and bad spending (unproductive spending on military and wars of choice).
The way to resolve this is through better government and education for democracy.
Better government requires addressing the selection process, which where the the problems are now being generated. A sine qua non is getting the big money out of politics.
Better education for democracy involves taking democracy seriously and educating people chiefly for citizenship rather than chiefly for a job as a cog in the machine. The price of freedom is vigilance. Presently, democracy is being hijacked, and liberty is in decline in order to further the reach of empire.
2. A basic idea of MMT is to use functional finance principles to create automatic stabilization that carries the heavy load so that the JG is a mop up operation of residual unemployment (those slipping through the cracks), because an economy cannot be fine tuned.
4. There is a tendency to see economic issues and solely or chiefly economic. This is a huge mistake, since the economy is the life support system of society and society has social and political aspects in addition to economic. Homo economicus is an idealization that makes formalization tractable. As a simplification, it filters the data. The question is whether relevant data is being filtered out that affects the model when it is applied socially and politically. The answer is, OBVIOUSLY! Conventional macroeconomics is junk science and involves special pleading when used for justification in policy formulation.
Homo economicus has limited use in microeconomics and no use at all in macroeconomics used as a policy science. "Macroeconomics" implies that macro is scaled up micro through aggregation. This falls victim to the fallacy of composition, and micro itself is a victim of oversimplification by assuming methodological individualism (homo economicus, representative agent, rational choice).
"Macroeconomics" needs to be rename "political economy" and the approach needs to be overhauled to bring it in line with evidence regarding outcomes. I am with Matt here. If you can't write a deterministic function that evidence supports, you most likely don't know what you are talking about and should severely qualify your claims if you make any.
Tom Hickey
You say: “There is a tendency to see economic issues and solely or chiefly economic. This is a huge mistake, since the economy is the life support system of society and society has social and political aspects in addition to economic. … Conventional macroeconomics is junk science and involves special pleading when used for justification in policy formulation.”
Both micro and macro is junk science. And MMT is a prolific junk producer because it is based on provably false macrofoundations. Because MMT lacks the true theory it is not more than soapbox economics.
It holds: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)
There is political economics and theoretical economics. The main differences are: (a) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (b) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
Theoretical economics (= science) has been body-snatched by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the past 200+ years. MMT is part of political economics.
Methodologically it holds: If it isn’t macro-axiomatized, it isn’t economics.#1 Because of this, neither Walrasianism, Keynesianism/MMT, Marxianism, Austrianism is economics. The four main approaches have no truth value, merely some political use value. Politics needs no true theory only some populist rhetoric and some pseudo-scientific make-up.
MMT is refuted on all counts.#2 There is NO place for MMTers in science. Politics and science have to be strictly separated and MMT has to be given the marching orders because of proven scientific incompetence.
Egmont Kakarot-Handtke
#1 The ethics of science is consistency ― economics is inconsistent
http://axecorg.blogspot.de/2017/09/the-ethics-of-science-is-consistency.html
#2 See cross-references MMT
http://axecorg.blogspot.de/2017/07/mmt-cross-references.html
"The big secret in Washington is that the federal government abandoned TABS back when it dropped the gold standard."
I don't think that's correct, rather I don't think TABS (taxes and borrowing precede spending) ever applied.
You can't collect taxes in dollars unless you've first created the dollars. Now it just may be that the government could only create dollars in exchange for gold, but you're still creating the dollars before you can tax them back. You're allowing yourself to "pure" deficit spend only on gold. Which is just as arbitrary of a self-constraint as is requiring bonds to be sold in an amount equal to the deficit.
EKH: Thanks for the response, especially considering my pedantic tone :-).
I conclude that you do not heed your own advice. Mostly, you're right here.
You say: the lack of slow and careful reasoning leads to making flatly false, indeed absurd statements like ‘budget surpluses are needed to pay off earlier deficits.’ Do you really believe this?” This is not a question of belief but of logic.
Right. It is a question of logic. Formalize what you're saying or use a toy model and one can see that the necessity of later surpluses is a non sequitur.
It is self-contradictory of MMTers to say money is basically an IOU without taking into consideration that IOU’s have to be redeemed in finite time.
No, they emphatically do take this into consideration. Scott Fulwiller in particular has written 'the last (latest) word' on such "fiscal sustainability" points - following Evsey Domar (and Keynes, Lerner etc.) The point of logic is that this redemption in a finite, or even explicitly bounded time does NOT imply "budget surpluses are needed to pay off earlier deficits", or "Money that is created by government deficits has eventually to be destroyed by government surpluses." And this is not by inflating debts out of existence, which one could call inflationary default if you want.
The true statement, that follows from the idea of money as credit, under reasonable interpretations, is that "(Net) Money that is created by government deficits [best to think of all government spending as money creation] has eventually to be destroyed by government taxation [not surpluses]". Something different and rather weaker.
MMT expositions rightly call many things myths. But they usually conspicuously omit how the idea that these myths are trying to get at is incorporated in MMT. I.e. how these myths are sorta true, which is why they have staying power. Trying to defeat something with nothing is not the best tactics or teaching.
I would explain more now, and will later, but I feel a cold coming on. I apologize for not having the time to respond in a more timely fashion.
Salsabob- Probably said this before, but the JG and other tools against inflation are "operationalizing the inflationary constraint". MMT and its ancestors have done the best job of all schools doing so - because their brand of economics is the one that is practically applicable and makes logical sense. Don't trust me - trust Hayek's praise of his buddy Keynes's ingenious ideas against inflation, say. On the other hand, far from being a constraint, deficit hysteria (like high interest) leads to big, bad deficits and in all likelihood, long term inflation. That's part of the deficit hysteria game plan.
Joe - that is absolutely right. If you look at it more carefully the common sense view that you can't destroy something until you create it always applies, at least if you talk about things in common sense language. IMHO using any other view or language is generally a bad idea, a way to confuse yourself and others.
Post a Comment