Friday, May 4, 2018

Sean Keith and Alexander Kolokotronis — "But How Will We Pay for It?": Modern Monetary Theory and Democratic Socialism

If democratic socialists see social democracy as one of the key stepping stones towards a truly egalitarian society, the issue of how we can sustainably finance such programs is of the utmost importance.
An economic doctrine named Modern Monetary Theory (MMT) is surging in popularity and offering answers. MMT is debunking popular narratives about the harsh necessity of austerity and belt-tightening. It is showing that money is not a finite abstraction, but a limitless public utility that can be used to meet human needs. More than this, however, MMT and its heterodox economic cousins offer a framework to build directly democratic, egalitarian political structures, and thus reimagine and recalibrate the viability of democratic socialism....
Lays out a Democratic Socialist program based on MMT understanding of government finance and heterodox economics.

Truthout | Op-Ed
"But How Will We Pay for It?": Modern Monetary Theory and Democratic Socialism
Sean Keith, second year student at Northeastern University in a BA-MA combined history program with a minor in Chinese, and Alexander Kolokotronis, Ph.D. student in political science at Yale University, founder of Student Organization for Democratic Alternatives, and formerly the student coordinator of NYC Network of Worker Cooperatives and worker cooperative development assistant at Make the Road New York

68 comments:

Matt Franko said...

“It is showing that money is not a finite abstraction,“

I would challenge anybody to point out an MMT document that identifies “money” (figure of speech) as an abstraction, finite or otherwise..,

Konrad said...

When it comes to making war, or making rich people richer, the U.S government has infinite money. (“Deficits don’t matter.”)

When it comes to helping average people, the U.S. government is “broke.” (“How will you pay for it?”)

Two minor quibbles about the article…

[1] Certain aspects of MMT are debatable, such as the need for a “jobs guarantee” or the mantra that “taxes drive money” (which is questionable, since money would be valuable even if federal taxes were reduced to zero). Other than that, however, the basics of MMT are not a “doctrine” in economics, just as the theory of aerodynamics is not a “doctrine” in physics. The basics of MMT do not explain how money could or should function, but how money actually functions in the real world.

MMT is not a guess, or a hypothesis, or a "doctrine." MMT is a THEORY -- i.e. a nexus of established objective facts, like the theory of thermodynamics, or the theory of gravity.

[2] From the article: “Taxes are not being used to fund spending, but rather to control inflation and redistribute income (and Trump's tax plan is certainly continuing the redistribution of income upward).”

No. Redistribution of income is real, but taxes are not part of it. The U.S. government creates its spending money out of thin air, simply by crediting bank accounts. Therefore, when the U.S. government lowers taxes on the rich, the government does not automatically raise taxes on the poor. U.S. government finances are like sports scoreboards. If we lower the points on one scoreboard, we do not need to increase points on a different scoreboard to “make up for it.”

To imply that taxation “redistributes income” is to imply that dollars are physical and finite, which they are not. Dollars only exist in human minds. We can represent dollars with symbols, but actual dollars are strictly mental entities. No one has ever seen a dollar; only a symbol that represents a dollar.

What sustains the gap between the rich and the rest is not a scarcity of money, but the greed of the rich, combined with the willful stupidity of the masses.

Konrad said...

TRIVIAL OBSERVATION

The World Wide Web became public on 6 Aug 1991, and exploded in popularity in the mid-1990s. During the Web’s first ten years, almost all web pages had a “print” buttons that viewers could click in order to print out articles.

By around 2008, however, almost all web pages eliminated “print” buttons in order to force viewers to slog through endless advertisements on each web page. (In the days when there were “print” buttons, we could read articles without advertisements.)

I just noticed that web pages on the Truth-out.org blog still have “print” options. Wow.

Tom Hickey said...

Some browsers have reader view that gives the reduced mobile version of the page. It's usually at the right of the address bar. All one needs to do is click on it.

Andrew Anderson said...

What sustains the gap between the rich and the rest is not a scarcity of money, Konrad

There's a finite price inflation space that the monetary sovereign and private credit creators both operate in. Therefore, to MAXIMIZE the amount the monetary sovereign might spend for a given amount of price inflation, there should be NO privileges for private credit creation.

The MMT crowd wants to save privileges for the banks. Therefore, the MMT crowd are, in reality, enemies of fiat creation for the general welfare; i.e. one cannot serve the general welfare AND the banks.

Andrew Anderson said...
This comment has been removed by the author.
Andrew Anderson said...

I.e. Matthew 6:24 "No one can serve two masters...

Calgacus said...

Konrad:[1] Certain aspects of MMT are debatable, such as the need for a “jobs guarantee” or the mantra that “taxes drive money” (which is questionable, since money would be valuable even if federal taxes were reduced to zero).

The JG, taxes drive money aren't questionable aspects of MMT, but strong points. Generally speaking, those who question them have not thought about them enough, have not done the required reading, have not tried to follow the MMT answers to their questions. Almost all "improvements" to MMT turn out to be mere repetitions of the progressive degeneration of Keynes, Kalecki etc, of the New Economics of the 30s & 40s, of the New Deal, which was basically MMT, back into the neoclassical economics it rebelled against.

Yeah, sure, taxes not absolutely theoretically necessary. But in practice, for all practical purposes, they are. If all taxes were reduced to zero in modern states, money would quickly become worthless. Why? - What are taxes? A demand for money. So saying taxes drive the demand for money is saying: A (very big, the biggest) demand for money drives the demand for money. Is that surprising or refutable?

lastgreek said...
This comment has been removed by the author.
lastgreek said...

I very much liked Konrad's comment, but I have just one minor quibble ;)

MMT is not a guess, or a hypothesis, or a "doctrine." MMT is a THEORY -- i.e. a nexus of established objective facts, like the theory of thermodynamics, or the theory of gravity.

I just want to say before I take the dog for his second walk of the day, that the definition for theory above that Konrad gave above is in the specific scientific sense. All fine and dandy. Unfortunately, in the everyday usage sense,the word theory is taken to mean an explanation that has some evidence supporting it, but evidence nonetheless that may in the future be contradicted. That's why when MMT is mentioned in conversation people think, "Ah, but it's only a theory, it's not really an established fact." So, that's why I never cared for the T in MMT. Should have been aptly named MMF: Modern Monetary Fact.

What? We should explain the specific scientific meaning of the word theory? Good luck with that ;)

Note: the comment was edited for family viewing. I said some stuff I shouldn't have said :(

Konrad said...

@ Calgacus...

Your claims sound like people who claim that U.S. dollars (and fiat money in general) are “worthless.” The claim sounds cute, but the people that make the claim refuse to surrender any of their “worthless” dollars to me.

So it is with the "taxes drive money" mantra. Suppose U.S. federal laws regarding money and currency were unchanged. And suppose that people remained accustomed to using dollars in their everyday transactions. Do you really think that people would stop using dollars if taxes were lowered to zero? That’s absurd. If taxes are what give value to money, then why don’t we quadruple taxes, so that we all become four times richer?

As for the JG, it is a cult that is energized by faith-based dogma. As with all cults, JG fanatics erupt in hostility when their nonsense is questioned.

If we want to create public works programs, then we can just do it like the 1930s New Deal. There is no need to demand silly “guarantees.” If we want to create jobs, then we just need to get more money into circulation and, if necessary, create public works projects funded by federal dollars.

The JG crusade is unnecessary, unworkable, and unneeded. Arguing about the JG is as pointless as arguing about how many angels can dance on the head of a pin. For me, the tendency of some MMT people to exclusively focus on the JG is bizarre.

We’ll have to agree to disagree on this. I apologize for not having done what you call the “required reading.”

Tom Hickey said...

1. MMT economists hold that taxes are a sufficient condition in creating a demand for money, but not a necessary condition; hence, a fortiori, not a necessary and sufficient condition.

But to be clear, MMT does not argue that taxes are necessary to drive a currency or money—critics conflate the logical argument that taxes are sufficient by jumping to the conclusion that MMT believes there can be no other possibility. In truth, MMT is agnostic as it waits for a logical argument or historical evidence in support of the belief of critics that there is an alternative to taxes (and other obligations). We have not seen any plausible alternative.

2. Is the MMT JG necessary for fully implementing MMT?

Éric Tymoigne and L. Randall Wray, sModern Money Theory 101: A Reply to Critics (Nov 2013), p. 10 (PDF download)

Randy Wray, IS THE JOB GUARANTEE NECESSARY?

Neil Wilson, Job Guarantee is a required part of MMT - official [Neil cites Bill Mitchell]

IIRC, when asked if the MMT proposals could be implemented partially without an MMT JG, Warren Mosler replied in effect — Sure, but don't blame me if you get inflation.

Konrad said...

@lastgreek...

I too dislike the term “Modern Monetary THEORY,” since most people misuse the term “theory,” and do not know what they are talking about.

For most people, “theory” means guess, hypothesis, or opinion.

The basics of MMT are facts, not opinions.

I agree that it should have been named MMF: Modern Monetary Fact. Or at the minimum, MMM (Modern Money Mechanics).

Andrew Anderson said...

IIRC, when asked if the MMT proposals could be implemented partially without an MMT JG, Warren Mosler replied in effect — Sure, but don't blame me if you get inflation. Tom Hickey

I can't see how paying people to waste their time is not inflationary, e.g. paying mothers to leave the home increases the demand for daycare, and perhaps down the road, social pathology in the form of neglected children.

But if Mosler, a former banker, wants to increase demand for fiat, he need only advocate the removal of all privileges for the banks and allowing all citizens to USE fiat and not be largely limited to using bank deposits.

Konrad said...

@ Tom Hickey…

If federal politicians want to create jobs (public works programs) then they can just do it. There is no need to use the politically charged word “guarantee.”

Imagine how right-wingers would scream if we started talking about a “Food Stamps guarantee.” Imagine how we would be ridiculed and derided if we started calling Universal Medicare a “health care guarantee.”

Therefore I leave other people to obsess on the JG.

Incidentally, MMT does not need to be “implemented.” MMT describes what is already implemented. MMT describes how money works in the real world.

Calgacus said...

Konrad:So it is with the "taxes drive money" mantra. Suppose U.S. federal laws regarding money and currency were unchanged. And suppose that people remained accustomed to using dollars in their everyday transactions. Do you really think that people would stop using dollars if taxes were lowered to zero?

Yes, of course. Look at the history of the Confederacy, say. The US government is too big, spends too much. T goes to zero and G stays big, deficits become huge forever, money inflates to being worth nothing. Look at WWII. Smaller deficits then than ones caused by eliminating taxes. They had to work very hard to control inflation.

If taxes are what give value to money, then why don’t we quadruple taxes, so that we all become four times richer?
Complete non sequitur. Quadrupling taxes would of course make everyone poorer according to taxes drive money / MMT.

If we want to create public works programs, then we can just do it like the 1930s New Deal. There is no need to demand silly “guarantees.”
The New Deal is the model of the JG. And the New Dealers FDR, Hopkins, Wallace, Perkins etc etc all tried to make the WPA etc into a JG, tried to guarantee jobs, said so in speeches and proposed legislation. The economic royalists fought them tooth and nail.

I apologize for not having done what you call the “required reading.”
Ignoring history and ignoring other people's thoughts is not usually a path to truth.

Tom Hickey said...

All scientific theories are tentative on discovery.

Necessary truth is logical. Tautologies say nothing about the world in themselves. Theories are logical constructs. Their "truth" is formal and not empirical.

No amount of testing can "confirm" in the sense of prove a general proposition. But a single counter-instance can disconfirm a generality.

This logic underlies scientific method.

Evidence is provided by testing hypotheses that are generated as theorems from axioms that stipulations serving as assumptions.

If an hypothesis generated as a theorem is disconfirmed, then it calls the assumptions into question.

If this is not the case, then the theory is not a scientific theory, strictly speaking.

A great deal of science is not science in this strict sense, since some branches of inquiry that are called "science," "sciences, or at least scientific" are not based on formalized theory.

But if hypotheses are testable through observation, direct or indirect, an inquiry is generally regarded as being scientific. This pertains to much of social science and psychology, which have not developed formalized theories but rather study special cases.

The term "theory" is used rather loosely in economics, and in many cases analogously with natural science. Usually the analogy is weak. When there is no testability or tests are not performed, one questions whether the some of the terms like "science" and "theory" are being used rhetorically rather than descriptively.

Konrad said...

@ Andrew Anderson...

I am confused.

I myself do not use "bank deposits" for my transactions. I use money.

This morning I found a five-dollar bill lying on the sidewalk. I spent it buying a gallon of gas. The five-dollar bill was not a "bank deposit."

Like I said, I am confused.

Calgacus said...

Arthur Anderson:

I can't see how paying people to waste their time is not inflationary
The JG is not a proposal to pay people to waste their time. That it is, is your claim. There is enormous evidence and logic that your claim is false.

Do you really think that it is a fair argument to make that claim without foundation, avoid talking about it? Do you really think that people treat your proposals the same way?

Konrad: Incidentally, MMT does not need to be “implemented.” MMT describes what is already implemented. MMT describes how money works in the real world.

Yes, but you need to do more required reading - check out Warren Mosler's - to understand MMT and how money works in the real world.

Andrew Anderson said...

This morning I found a five-dollar bill lying on the sidewalk. I spent it buying a gallon of gas. The five-dollar bill was not a "bank deposit." Konrad

Correct but have you ever tried buying anything over the INTERNET with physical fiat? Why, instead of using a Visa, Mastercard, etc. debit or credit card may you not, if a US Citizen, use a Federal Reserve debit (NOT credit!) card?

Tom Hickey said...

#1 above should be:

1. MMT economists hold that taxes are a sufficient condition in creating a demand for money, but not a necessary condition; hence, a fortiori, not a necessary and sufficient condition.

But to be clear, MMT does not argue that taxes are necessary to drive a currency or money—critics conflate the logical argument that taxes are sufficient by jumping to the conclusion that MMT believes there can be no other possibility. In truth, MMT is agnostic as it waits for a logical argument or historical evidence in support of the belief of critics that there is an alternative to taxes (and other obligations). We have not seen any plausible alternative.

Éric Tymoigne and L. Randall Wray, Modern Money Theory 101: A Reply to Critics (Nov 2013), p. 10 (PDF download)

Konrad said...

TOM HICKEY WRITES: “All scientific theories are tentative on discovery.”

Thanks for your comment. I say that genuinely scientific theories are based on universal observability, testability, falsifiability, and repeatability. For example, we know that the theory of aerodynamics is correct, since it enables us to fly.

TOM HICKEY WRITES: “Theories are logical constructs. Their ‘truth’ is formal and not empirical.”

Empirical means universally observable and testable. All scientific theories are empirical (or at least mathematically provable) or else they are not theories. They are mere hypotheses.

TOM HICKEY WRITES: “The term ‘theory’ is used rather loosely in economics, and in many cases analogously with natural science. Usually the analogy is weak. When there is no testability or tests are not performed, one questions whether the some of the terms like 'science' and 'theory' are being used rhetorically rather than descriptively.”

Economics is a social “science.” As such, economics has little of what I would call formal scientific theories. In economics the word “science” and “theory” are often employed to camouflage ideology and bulls**t.

Konrad said...

@Calgacus...

Because I have read the book of Scientology, and I do not agree with those books, I need to do more required reading of those books.

Because I have read the entire Bible and I do not believe it, I need to do more required reading of the Bible.

Likewise, because I have read endless nonsense about the JG, and I do not agree with the JG cult, I “need to do more required reading” of the same nonsense.

Whatever. I'll grant you the last word on this. Go for it.

Tom Hickey said...

Now it's mostly poor people and those seeking to preserve anonymity that use cash. Everything else is done by crediting and debiting accounts.

Tom Hickey said...

Empirical means universally observable and testable. All scientific theories are empirical (or at least mathematically provable) or else they are not theories. They are mere hypotheses.

A scientific theory is based on a formal model that is a series of tautologies that follow from the stipulations (axioms) iaw the rules of logic and math.

A scientific theory as a formalized system must be consistent logically and mathematically. Logical and mathematical proof is about consistency. It has nothing to do with empirical truth based on observation since it is based on following rules correctly.

The model is assumed to be representational within the scope and scale of the model. The degree of representation is tested by generating hypotheses that are testable, ideally, by well-designed experiment.

That is to say, a theoretical model is tested against what it purports to represent using observation, generally speaking in science, based experiment to test hypotheses generated as theorems.

If hypotheses are well-confirmed, the theory is accepted as guiding normal science in that area and thee stipulations of the theory are regarded as scientific "laws." This no guarantee that such "laws" cannot be broken by further discovery.

The scientific method is basically skeptical, being tentative on new discoveries.

Tom Hickey said...

I'll grant you the last word on this. Go for it.

I'll take you up on it. You've opted out of MMT and have instead substituted your own version of it and called it "MMT."

Calgacus said...

Konrad, thank you for graciously leaving me the last word. But I mostly wrote about taxes drive money above. That should probably be understood before the JG. I of course am a member of the JG cult.

But I think you do not understand some basic things about MMT, about money. As I suggested above, your thinking is more like Schumpeter's watered down legal tender chartalism, used to recapitulate postwar Keynesianism - hydraulic Keynesianism, ignoring finance, applicable only in post WWII conditions of high public, low private debt as Minsky noted. These are known errors, half-right, but of which there is ample MMT criticism.

Tom gave some great links above like Wray's blog IS THE JOB GUARANTEE NECESSARY? - The comments are very interesting.

In any case, "required reading" referred to Warren Mosler's blog, once one of the most active MMT sites. One of the things there is one of Alfred Mitchell-Innes two papers on money, which Wray has called the best two papers ever written on money. (I agree) So I think it is safe to say that if one hasn't read them, one is not likely to understand MMT.

I don't know of course, but from your comments, it seems like you have read less than "the entire bible" of MMT, and understand some, but not all.

If you want a more recent example of how non-acceptance by the government can make money, even money that has been used in great quantities by hundreds of millions of people, worthless, see 2016 Indian banknote demonetisation

Andrew Anderson said...

The JG is not a proposal to pay people to waste their time. Calgacus

The primary purpose of a JG is to preclude, for 40 or so hours a week, people from working in the private sector (or for themselves) so as to raise private sector wages - not to accomplish useful work.

I'm all for generous infra-structure spending because that is meant to get work done, not to implicitly blame, patronize and waste the time of needy citizens.

Now Cal, please refer me to any MMT writings on the abolition of government-provided deposit and other privileges for the banks such as exclusive access to checking accounts at the Central Bank?

Calgacus said...

The JG is not a proposal to pay people to waste their time. Calgacus

Andrew Anderson:The primary purpose of a JG is to preclude, for 40 or so hours a week, people from working in the private sector (or for themselves) so as to raise private sector wages - not to accomplish useful work.

No, that is not at all the primary purpose of the JG. Taking the actual JG proposal and saying it says something it doesn't say is the problem. The last is the opposite of one of the purposes of the JG. The JG proposes "accomplishing useful work". "Not to accomplish useful work" is not part of the JG.

I mean, like minimal accuracy in argument, minimal respect, as much respect as you are given. Or why not say that the Job Guarantee idea is to pay people to become flesh-eating zombies? At least it is more colorful and amusing.

I can't refer you because there really isn't anything out there. The closest is maybe a paper Wray etc wrote responding to Postive Money & "debt-free money". Scott Fulwiller cited it here a while back.

Tom Hickey said...

The primary purpose of the MMT JG is provide a way to achieve and maintain actual full employment (less transitional) by offering a job to anyone willing and able to work, while also controlling for inflation with a price anchor linked to labor time.

The method is by using a buffer stock of employed to replace the current buffer stock of unemployed, which is economically inefficient and socially damaging.

What is so difficult to get about this?

Andrew Anderson said...

I can't refer you because there really isn't anything out there. Calgacus

Isn't that odd since government-privileged credit creation is the means by which workers have been precluded from "sharing" in productivity gains since why share when one can legally steal?

Andrew Anderson said...

What is so difficult to get about this? Tom Hickey

What is so difficult about the need for equal protection under the law? What is so difficult about victims should not have to work for compensation?

But go ahead and anchor yourself to injustice and see where that leads - not to honor, that's for sure.

Andrew Anderson said...

The JG proposes "accomplishing useful work". Calgacus

And if there isn't enough useful work to be done without competing with the private sector, resorting to spoons instead of bulldozers, or paying people to babysit each other kids?

Yes, a JG is worthy of scorn for many reasons, not the least of which is justice.

And yes, a desperate population will accept nearly any "solution" to their problems but shame, shame on the MMT folks for not offering them something remotely just.

Calgacus said...

What is so difficult about the need for equal protection under the law?
Well, defining equality, for one. If you think about justice and equality carefully, you will see a JG is necessary for justice in a monetary economy. It is very important that you bring up moral issues, justice and equality. But it is just as important to think carefully about them.

What is so difficult about victims should not have to work for compensation?

A JG is not asking victims to work for compensation. That is your assertion, your misunderstanding, your mistake. A JG is better described as giving a victimizer a way to redress the injury to his victim. Or much the same, a benefactor to have a guarantee of some benefit in return.

But what about the victims of a monetary economy without a JG? There will be, have been many. Many millions.

And if there isn't enough useful work to be done without competing with the private sector, resorting to spoons instead of bulldozers, or paying people to babysit each other kids?

This is a condition which has never been met anywhere in the history of humanity, and beyond serious question never will. And what is wrong about being paid for babysitting? This is kind of misogynistic as many or most young womens' first job as a teenager is babysitting. And who cares about not competing with the private sector? Don't you care about human beings, not corporations? What IS the private sector anyways?

But go ahead and anchor yourself to injustice and see where that leads - not to honor, that's for sure.

Andrew, do you think you are God or that your words and ideas are divinely inspired? Do you think you can instantly perceive injustice without examining facts and arguments? Or do you think you are a fallible human being?

You're here because you are asking other people to listen to you, to take you seriously. I think I have tried sometimes. On occasion I haven't, for which I ask your pardon if you are offended.
But don't you think justice demands that you be willing to listen to other people? If they say something, to try to actually understand it, not to distort it, not to put it in your own words (which they say) distort it beyond recognition.

If you are asked to consider a general argument, don't throw in (what they are saying is) irrelevant and leap to desired, foregone conclusions at high speed. But slowly follow arguments in baby steps. That's how arguments in logic, the law, mathematics, philosophy and computer science work. You couldn't be reading this on a computer screen if computer geeks didn't make computers work that way.

Forgive me for the wording if it is too sharp, but what do you think of my last comment (in the thread) at Jeff Epstein — The Federal Job Guarantee Is Not Just “Better” Than a Universal Basic Income. It’s the Only Reasonable Option. Universal Basic Income Is Sinister.?

Lots of people have seen the justice in the JG. For centuries. What makes you so sure they are wrong? Without, in my humble opinion, giving them a fair hearing?

Andrew Anderson said...

And what is wrong about being paid for babysitting? Calgacus

Nothing; you missed the absurdity of mothers being paid to babysit the children of other mothers when they could babysit THEIR OWN CHILDREN instead?

But if people did for themselves with adequate incomes, then what place is there in the world for busybody meddlers?

What makes you so sure they are wrong? Without, in my humble opinion, giving them a fair hearing?

I've given them a fair hearing. Otoh, Yves Smith, a JG proponent, calls the idea of inherently risk-free checking accounts for all citizens "balmy." And Neil Wilson will not consider the abolition of government-provided deposit insurance.

Like, I've said, let's have generous infrastructure spending AND a Citizen's Dividend (which your hero Neil Wilson calls "theft" even though it would go equally to all citizens). Then as automation eliminates more jobs the Citizen's Dividend could increase to compensate.

Kaivey said...

I like Modern Money Mechanics. Modern Money System.

Calgacus said...

(1/2)
Nothing; you missed the absurdity of mothers being paid to babysit the children of other mothers when they could babysit THEIR OWN CHILDREN instead?

I thought you might mean that, but you didn't actually say that. :-) But there is nothing wrong with people taking in each other's laundry. That is what happens in society. Maybe the kids are going to schools near the other mother's house. When I was a kid, my parents took in my cousin Federico while my sister went to live with his family for a few months, each to see the other country and learn the language.

But if people did for themselves with adequate incomes,

Good. But that's the Job Guarantee.

then what place is there in the world for busybody meddlers?

Right, but that is the Citizen's Dividend, Basic Income etc.

You have the right passions and outlook. Once upon a time I sort of thought the way you do now. But if you slow down and look at the logic, you will see as I did that you have some wires crossed. You're even echoing things Harry Hopkins & FDR (and many others) have said, but backwards.

But anyways, we have a very important agreement here. Busybody meddlers bad. Doing for yourself good.

I've given them a fair hearing.
Really? I disagree.

To me, part of a fair hearing means that if I bring up step 1 of an argument that has several steps, you absorb that and understand what it is being said, that doesn't mean you must agree. Just understand what I say like "Nitrogen is a liquid at room temperature."

Don't bring in your own stuff yet. Try to follow my argument to the next step. Just slow down and follow the chain. If I am making a fool of myself as a JG cultist, let me. Give me the rope to hang myself.

Calgacus said...

(2/2)
Otoh, Yves Smith, a JG proponent, calls the idea of inherently risk-free checking accounts for all citizens "balmy."
It is not balmy, I support it, so do MMT thinkers - they think Post Office banking is good.
The difference is that we disagree on the size of the benefit.

And Neil Wilson will not consider the abolition of government-provided deposit insurance.
I see your point, privileging private entities can be dangerous. But this cure is worse than the disease: it would be like having the Post Office / Citizen's account at the Fed bank NOT insure deposits. The usual MMT way is to spank and discipline private banks so they are close enough to publicly owned banks for practical purposes. Bill Mitchell is pretty close to your position, suggesting nationalizing banks. But again, the MMT position is - so what? Do it, but don't expect much from it. It isn't the real problem, but a side issue.

Like, I've said, let's have generous infrastructure spending AND a Citizen's Dividend (which your hero Neil Wilson calls "theft" even though it would go equally to all citizens). Then as automation eliminates more jobs the Citizen's Dividend could increase to compensate.

Yes, ideas with some merit. But also some major flaws. Slow down, then you could see why a "citizen's dividend", (monetary) "basic income" is either theft or slavery, or something logically impossible, or something pointless, like writing yourself a check for a million dollars and then paying yourself a million to brush your teeth and tearing up the check. Or it is just welfare, something every state has now, has always had. It's a proposal that wheels on buses should go round and round. Well, sure, but that isn't a change. They go round and round already. In no case does a Citizen's Dividend really change anything for the better.

I mean, I can't explain everything at once. I can't explain everything in the last paragraph at once. Wouldn't it be faster for each of us to "give fair hearing" by the other sides judgment - and not just repeat the same old things again and again and again? I tried to give a fair hearing to you above. I hope you agree.

I do admit that I have been too dismissive of you at other times. It's a disease of the internet. People blow off steam at each other and end up doing nothing but blow off steam. I'll try not to do this, at the very least to separate and signal the "Serious discussion, like in a classroom or a court" and the "blowing off steam", and focus on the former.

On the other side, I will not agree that you are giving a fair hearing if you reply to the beginning of a Job Guarantee discussion with things like "A JG is paying people to waste their time" etc. You would have to prove such a thing, after many pages of discussion and mutual agreement. Assuming that "I must be right" "The other guy must be wrong" at the beginning makes the whole discussion pointless. We each have to start with the idea "I might be wrong". "The other guy might have good ideas".

Andrew Anderson said...

Slow down, then you could see why a "citizen's dividend", (monetary) "basic income" is either theft or slavery, or something logically impossible, or something pointless, Calgacus

One might argue that foreigners would be cheated but they should have no expectation that US monetary and fiscal policies shall cater to foreigners.

One might argue that the government-privileged usury cartel, having driven the population into debt-slavery, nevertheless has a right to be paid back with equal (or greater!) value money (bank credit or fiat). I say no and btw is Neil Wilson a banker?

One might argue that giving every citizen an equal amount of fiat is pointless but it isn't since it allows debtors to paydown or payoff their debt without necessarily disadvantaging non-debtors, especially if the non-debtors are immune to rent increases.

Slavery you say? Setting debt-slaves free is slavery?!

So a Citizen's Dividend is neither theft, slavery or pointless.


Andrew Anderson said...

In no case does a Citizen's Dividend really change anything for the better. Calgacus

Ready to admit you are wrong here? If not, though a Citizen's Dividend is easily defended by itself, an even stronger case can be made if a CD is combined with deflationary measures such as de-privileging the banks.

Andrew Anderson said...

I see your point, privileging private entities can be dangerous. But this cure is worse than the disease: it would be like having the Post Office / Citizen's account at the Fed bank NOT insure deposits. Calcagus

Deposits at the Central Bank are inherently risk-free.

Ready to admit you're wrong here too?

Andrew Anderson said...

And I don't advocate a Post Office Bank, especially one that lends, but that all citizens should have inherently risk-free accounts at the Central Bank itself so they can DIRECTLY use their Nation's fiat, just like the banks do.

A Postal Bank is a red-herring, i.e. a diversion from real reform.

Andrew Anderson said...

Nor do I advocate nationalizing the banks nor have I ever advocated nationalizing the banks.

My position is 100% private banks with 100% voluntary depositors.

Noah Way said...

Are you sure you're name isn't Arthur Andersen?

Calgacus said...

Andrew Anderson: I was trying to find areas of agreement with you. I was very roughly equating a Post Office Bank or nationalized banking systems with your idea:

all citizens should have inherently risk-free accounts at the Central Bank itself
To me, having a bank account is part of "banking". So this proposal directly contradicts
100% private banks with 100% voluntary depositors

Again, my point is fine, do it, do all your banking proposals, do whatever you want. But don't expect much.

One might argue that giving every citizen an equal amount of fiat is pointless but it isn't since it allows debtors to paydown or payoff their debt without necessarily disadvantaging non-debtors, especially if the non-debtors are immune to rent increases.

Sure. The MMTers have even recently proposed forgiving student loan debt, a la ancient jubilees. Great. But to be clearer, my points are - (a) Why have a system that needs such jubilees? And (b) After the jubilee, a Citizen's Dividend is pointless at best, unjust and destructive at worst. I'm generally speaking about the whole, longterm system. Not a temporary quick fix.

I see your point, privileging private entities can be dangerous. But this cure is worse than the disease: it would be like having the Post Office / Citizen's account at the Fed bank NOT insure deposits. Calcagus

Andrew Anderson: Deposits at the Central Bank are inherently risk-free.


Again, my point, which is almost universally accepted is that the cure (eliminating deposit insurance) is much, much worse than the disease. (moral hazard). That's why I compared it to your proposal (citizens banking at the Fed) minus an essential feature - NOT something you propose. Can we agree that no deposit insurance and no citizen banking at the Fed is a terrible idea?

As before, if we have citizen banking at the Fed, then get rid of deposit insurance. Ok, I'm fine with that. But again, don't expect much from it.

On the problems with citizen's dividend, basic income, I said I can't say everything at once. A major problem is that to have an extended argument, one needs to provisionally accept the opponent's premises "for the sake of argument". Or we will never get anywhere. That is what I tried to do above.

Andrew Anderson said...

To me, having a bank account is part of "banking". So this proposal directly contradicts
100% private banks with 100% voluntary depositors
Calgacus

No, it doesn't since every citizen having an inherently risk-free account or multiple accounts at the Central Bank does not preclude them from also having an account or accounts with 100% private banks with 100% voluntary depositors.

Andrew Anderson said...

And (b) After the jubilee, a Citizen's Dividend is pointless at best, unjust and destructive at worst. I'm generally speaking about the whole, longterm system. Not a temporary quick fix. Calgacus

Fiat creation is good to keep up with population growth and to avoid rewarding money hoarding with risk-free gains from deflation.

So any desired fiat creation beyond that created by deficit spending by the monetary sovereign for the general welfare ONLY should be via equal fiat distributions to all citizens - NOT via lending or asset buying from the banks and the rich.

Andrew Anderson said...

Again, my point, which is almost universally accepted is that the cure (eliminating deposit insurance) is much, much worse than the disease. (moral hazard). Calgacus

Not all at once, but PROGRESSIVELY - say over 5 years (20% reduction in insured limit/yr), with equal fiat distributions to every citizen to provide the needed fiat - which the banks could then borrow or buy to obtain the needed reserves for the transfer of formerly insured deposits to inherently risk-free accounts at the central bank.

Andrew Anderson said...

I was very roughly equating a Post Office Bank or nationalized banking systems with your idea: Calgacus

Neither the central bank, nor a Post Office Bank, nor the monetary sovereign should lend fiat.

What I am advocating is risk-free debit and checking services available to all citizens. Lending would be, as it should be, the province of 100% private lenders with 100% voluntary depositors.

Calgacus said...

Andrew: The first response is just quibbling over semantics. Surely you see what I mean? We don't disagree. Your proposal is just explained in a way that might confuse people.

The second is confused. Lending or asset buying can't create fiat money. Only deficit spending can. (Which should include hidden deficit spending by the central bank and other gimmicks, true). Again, "equal fiat distribution" is basically pointless, don't really want to argue about it at the moment. Why not propose that everyone run on a treadmill or a giant squirrel wheel?

In general, and to ride a personal hobbyhorse for a minute, like many MMT fans, you seem to think that "fiat" money is something magical and new. No, all money is fiat money, credit money and always was. Fundamentally, state money and bank money are the same thing. Government finances and household finances can be compared. That's the whole point of MMT - to do it correctly, MMT slogans to the contrary. The problem is not with the household analogy, but with the logic used by bad economics when they are doing it.

But again, can we talk about a job guarantee without hearing immediately that it is a way to waste people's time? Other people, famous people like FDR & Harry Hopkins saw and said- correctly imho - that basic income / citizen's dividends / welfare is busybody meddling, while guaranteed jobs are "doing for yourself" and not a waste. Is it possible that they could be right and you could be wrong?

Andrew Anderson said...

Lending or asset buying can't create fiat money. Calgacus

When the central bank does the lending or asset buying it does.

Calgacus said...

When the central bank does the lending or asset buying it does.
OK

Andrew Anderson said...

Fundamentally, state money and bank money are the same thing. Calgacus

No they are not as is evident during bank runs. And this will be especially evident when government-provided deposit insurance and other privileges for the banks are abolished such as exclusive access to inherently risk-free accounts at the Central Bank.

Calgacus said...

Fundamentally, state money and bank money are the same thing. Calgacus

No they are not as is evident during bank runs.


I'm speaking at a more fundamental level, they're conceptually the same thing. State money is money issued by states, bank money is money issued by banks. My arm and your arm are both arms, instances of the concept arm. That is not saying they are the same arm.

Andrew Anderson said...

that basic income / citizen's dividends / welfare is busybody meddling, while guaranteed jobs are "doing for yourself" and not a waste. Calgacus [bold added]

Every month I receive a Social Security check that I am free to spend as I please (legally, that is).

But I would be much more free of busybody meddling if additionally I had to show up at a JG site and be bossed around for 40 hours/wk?

I think Konrad has you pegged correctly as a cult follower.

Andrew Anderson said...

I'll concede that welfare is often meddlesome but a citizen's dividend would not be.

Calgacus said...

Every month I receive a Social Security check that I am free to spend as I please (legally, that is).

You don't get Social Security (the main program) if you don't get vested into the system by working. SS is much closer to a JG than to a citizen's dividend or welfare. They were created by the same President & Congress, you know. You think they were right to set up a program to give you that check, based on your work, but their reasoning is not worth a hearing?

I said I was a cult follower myself above. What I am interested in whether my cult's beliefs are true or not. I'm also a member of the "civilized discussion" cult, and occasionally try to practice what I preach.

Calgacus said...

They were created by the same President & Congress, you know
I mean, the work programs like the WPA, a quasi JG and SS were created by the same pres and congress.

Andrew Anderson said...

Here's what the JG cultists apparently support:

1) Continued welfare for the banks and, by extension, for the rich, the most so-called creditworthy of what is then, in essence, the PUBLIC'S CREDIT but FOR PRIVATE GAIN.
2) Wage slavery for the needy victims of welfare for the banks and, by extension, for the rich.

Now tell me why I should even wish to discuss anything further with you since I've written many, many comments laying out what I advocate to apparently, given your ignorance, no avail?


Calgacus said...

Here's what the JG cultists apparently support:
All that is only what is apparent to you.
Appearance, not reality. That is NOT what they or I say. That is very different from what we say. MMTers & me oppose your 1 & 2.

since I've written many, many comments laying out what I advocate to apparently, given your ignorance, no avail?

I've tried to agree with you a lot above. Seemed like you even sometimes, eventually agreed with my formulations of your positions. That is "avail", not "no avail".

I'm just asking you to similarly say that "The JG is not necessarily pure evil. I might be wrong. Let's think about it and discuss it without pre-judgment."

Konrad said...

@Andrew Anderson:

I say that JG advocates are cultists because they fanatically cling to the word “guarantee.” This world is problematic and politically charged.

My position is that a jobs "guarantee" is unnecessary. Why obsessively cling to the word “guarantee”? Why not say we want the U.S. government to create jobs by commissioning New Deal-type public works programs?

If we called Medicare a “minimal health guarantee,” and Social Security a “monthly stipend guarantee,” we would give more ammunition to people who seek to destroy such programs.

The JG is a religion; a faith-based fantasy. This is why JG jihadists become so hostile when you question their dogma.

MMT basics are incontrovertible, but the JG is merely a wish. And yet, if you question the JG dogma, you are condemned as a heretic who has “not done the required reading.” You are a an apostate; an infidel. You have not been sufficiently programmed by the cult.

The engine of the cult is guru worship. Since Randy Wray is a JG cultist, the JG is “true” for the rest of the cultists. Since Randy Wray chants that “taxes drive money,” the mantra is “true” for the rest of the cultists.

If you decline to become a member of the JG jihadist cult, then you are a blasphemer.

Worse than all this, the JG is based on the false belief that rich people deserve their free lunch, while poor people deserve to toil. Rich people don’t need a JG, since they don’t have to work. They own. They accrue money and power by merely breathing. Rich people claim that this is their right. They say the poor have no such right. They say the poor must sweat.

This lie is perpetuated by JG dogma. The gap between the rich and the rest is legitimized by JG dogma. (“The poor must toil, or else they are evil. And with a JG, the poor can be assured of toiling.”)

I say we should forget about the JG, and concentrate on spreading basic truths -- e.g. the U.S. government is not “broke,” and does not have a “debt crisis.”

Tom Hickey said...

"Guarantee" denotes a promise or pledge. That promise is based on a putative human right as in the UN Universal Declaration of Human Rights, 23 "23. Workers’ Rights. Every grown-up has the right to do a job, to a fair wage for their work, and to join a trade union."

It is not a gift, handout or entitlement. It is a right established in law, and when a JG bill is crafted it should so state.

Andrew Anderson said...

How nice! A right to be a wage-slave! And to join a trade union too!

And what good will trade unions be when almost all jobs have been automated away, Tom? Especially given that a JG is meant to raise private sector wages via artificial labor shortages?

Here's a hint: Advocate for justice and what you advocate will never become (laughably) obsolete.

But what is justice? You say the Bible is subject to many interpretations and thus (you imply) useless to read. I tell you it isn't on both counts. "Seek and you shall find" certainly applies to knowing what justice is.

Konrad said...

@ Andrew Anderson...

Your comment leads me to another problem with the JG.

In the USA the lower classes are crippled by rent and by debts (mortgages, student loans, etc). Indeed, U.S society is currently structured so that all monies eventually flow upward to the rich.

Meanwhile corporations use their obscenely high profits not to create jobs, or do research, but to buy back stock, pay dividends, and pay off debts from pursuing mergers and acquisitions.

Many US cities have housing shortages that, when combined with housing speculation, is causing horrendous price bubbles.

Unless these factors are modified, a JG would be useless, even if it could work. Sure, you have a job, but in many parts of the USA your rent would go up in proportion to your added income. All monies would continue to "trickle up" to the top.

Without a national program of affordable housing and rent controls, I don’t see how a JG would benefit us. Without crucial changes to society, a JG would only widen the gap between the rich and the rest. It would only feed the cancer.

If I am wrong about this, then I wish someone would explain why, because I like the idea of a Universal Basic Income, but I fear that it would create the same problems as a JG.

Andrew Anderson said...
This comment has been removed by the author.
Andrew Anderson said...

Without a national program of affordable housing and rent controls, I don’t see how a JG would benefit us. Without crucial changes to society, a JG would only widen the gap between the rich and the rest. It would only feed the cancer. Konrad

Yes, so let's get citizens out of apartments and rental houses into their own houses or condos. The only thing stopping many is lack of the down payment since they are already paying as rent what could otherwise be a mortgage payment instead. So let's gift every citizen without a house or condo the down payment if they can otherwise afford the house or condo they wish to buy.

Additionally a high Federal Real Estate Tax on the ownership of existing houses and condos beyond a single homestead exemption would encourage those who own rent houses or condos to sell them to those who have no house or condo at all.

As for long term interest rates, we know they can kept as low as desired.

Andrew Anderson said...

If I am wrong about this, then I wish someone would explain why, because I like the idea of a Universal Basic Income, but I fear that it would create the same problems as a JG. Konrad

I no longer advocate for a Universal Basic Income but for a Citizen's Dividend since a CD does not imply income sufficiency and thus does not serve as an excuse to cut existing transfer payment programs such as Social Security and Supplemental Security Income (SSI).

Andrew Anderson said...

So let's gift every citizen without a house or condo the down payment if they can otherwise afford the house or condo they wish to buy. aa

On second thought, the down payment gift should be equal to every citizen without a house or condo but certainly adequate for a comfortable house or condo.

But won't those who already own their own home feel left out? Yes, so this argues for a one-time equal fiat distribution to all citizens with the following provisos:
1) Those who owe debt must use all, if necessary, of their fiat distribution to pay their debt off or down.
2) Those who don't own a home must use at least part of their fiat distribution to buy one that meets Federal standards.