An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Thursday, June 21, 2018
Eric Schliesser — On Ibn Khaldun and Ronald Reagan (and a now obscure Belgian scholar)
Not particularly important unless you are interested in the history of economics, but it is interesting owing to the Reagan connection compared with post 9/11 Islamophobia.
“Supply-side theory, among other things, holds that a cut in tax rates will stimulate the economy and thus generate even greater tax revenues.”
As though the U.S. government needs tax revenues.
Supply-side theory is not a theory, but a bullshit claim that if we give everything to the rich, then some of the crumbs will “trickle down” to the lower classes. What actually happens is that the rich keep whatever they are given. They even work to cut social programs that they do not pay one penny for (e.g. Medicare and Social Security).
Actually, the MMT economists would agree with Ibn Khaldun, with qualifications, e.g., sovereign currency issuer that doesn't undertake financial obligations in a currency it doesn't issue doesn't is sefl-funding and doesn't need to taxes for fund itself. That said, taxes not only create demand for the currency in non-government but taxes also withdraw purchasing power from non-government. Since inflation is a financial constraint, governments can use tax policy for inflation control.
Warren Mosler, especially, as argued that taxes in the US are higher than they need to be to control inflation and they can and should be reduced to stimulate a lagging demand and increase investment. This would result in lower unemployment.
Other MMT economists (can't recall the detains offhand) have argued that the tax rate needs to be set correctly, since taxation is part of automatic stabilization and acts countercyclically wrt to both stimulus in contractions and inflation control in expansions. Presently, the tax rate is higher than it needs to be which tends to dampen expansions too quickly.
So Ibn Khaldun was correct in principle, but the how and why is controversial. MMT explains both.
The Laffer curve is correct in principle, too. It's the application that has missed the mark since those applying it lack the nuance of understanding that MMT provides.
Failure to understand this is also way most progressives also miss the mark badly.
If you never had to pay taxes, would you stop wanting or using dollars? No. The demand for currency would continue with or without taxes. Therefore taxes do not create demand for currency.
Evidently MMT people get stuck in ruts, just like other people. They hear something from an “authority figure” (e.g. the false mantra that “taxes drive money”) and they cling to it as infallible gospel.
If you never had to pay taxes, would you stop wanting or using dollars? No. The demand for currency would continue with or without taxes. Therefore taxes do not create demand for currency.
The MMT economist emphasize that claiming "taxes drive state money" should be take in the sense that taxation is a sufficient condition for creating demand for a currency but not a necessary one.
They also say that once a currency is in wide use, demand becomes established, although taxation will maintain the need to obtain it in case pressure on the currency arises, preventing it from becoming worthless (purchasing power, hence value, falling to zero).
However, there is reason to think that this is more a "principle" rather than a statement that has an empirical warrant to support it.
I suspect that you know I am correct, but you are looking for a way to imagine that I am not correct. That’s okay.
I just ask people to not believe everything that “authority figures” claim.
I once emailed L. Randall Wray about this. It was just one message with a reply from him, but he became angry that I dared to question one of his assertions.
Anyway this “taxes drive money” issue would be trivial if MMT people did not repeatedly emphasize it in their articles and presentations.
The “taxes drive money” mantra indirectly supports the myth that the federal government needs tax revenue, and hence there is “no money” for social programs.
I don't know whether you are correct. I am not an economist and don't have the background necessary to comment on it myself. I can only repeat what I have heard from the MMT economists.
My question from the logical pov and that of philosophy of science is about the justification for the claim. I haven't seen anything on this, but I haven't researched it.
One reason I haven't is that I don't have access to articles that are behind a paywall and that includes much of the relevant information in econ. In addition, many of the books that are relevant are priced to high to purchase for a purpose I don't regard as essential.
I can understand where Randy and the other MMT economists are coming from that are working in the field of theory of money. So chartalism is important to them in countering opposing theories of money.
The further question is whether it is optimal strategy, as MMT economists apparently accept, to feature the chartalist theory as fundamental to MMT in approaching how to frame the debate to the advantage of MMT.
taxes also withdraw purchasing power from non-government. Since inflation is a financial constraint, governments can use tax policy for inflation control.
Unfortunately, taxes are not used effectively for either purpose. They are used to increase purchasing power of selective non-government entities and decrease the purchasing power of selected targets. Inflation control is left to largely ineffective interest rates that are primarily used by non-government entities for profit.
For the record, Reagan cut taxes on the rich, raised taxes on everyone else, and engaged in massive deficit spending (tripling the national debt in his two terms) that generated increased tax revenue. Neoliberals utterly ignore the deficit spending and claim the tax cuts as the source of increased tax revenue. As if pumping trillions of dollars into the economy would not generate taxes ...
Konrad wrote: “The “taxes drive money” mantra indirectly supports the myth that the federal government needs tax revenue, and hence there is “no money” for social programs.” ……………...
[My reply in a nutshell: Household Analogy = HALF true, the BUSINESS Analogy = 100% False.]
Konrad - It is the myth that governments need to sell bonds that makes the public think there is “no money” because we are in “Debt”. …
The government token/tax-credit system is the system the people use to coordinate group projects; it incidentally gives rise to tax-credits tradeable as “money”. Taxes are indeed what drive this part of the currency system. No, tax receipts do not need to match 1:1. But there does have to be a well thought out and executed taxation system that maintains the price level (value of the government token).
Taxes don't pay for anything, but they absolutely do drive the currency.
BONDS do nothing at all and are the worst offender for confusing the public with the concept of “debt”.
Rather that the “False Household Analogy” on taxes, I think of it as the “False Business Analogy” (that a sovereign government ever needs to fund itself with bonds).
The Household Analogy is only half false – taxes are not the source of funds, but they do indeed give value to the government token.
The BUSINESS Analogy is TOTALLY false. Sovereign governments never need to sell bonds and are never in “debt” via bond sales in their own currency.
Really we should all bang on about the False Business Analogy more.
(I am writing a short book on this, and it will distinguish the False Household Analogy from the False Business Analogy – as far as I know the FBA has not been a common distinction from the FHA but it should be).
As if pumping trillions of dollars into the economy would not generate taxes ...
Government spending becomes someone's income and owing to flows, it is often many people's incomes. Much of the injection is therefore taxed back, although in aggregate that which is not taxed back is saved in tsys as the deficit, available for funding future taxes. So government provides the funds that are eventually repaid in taxes.
The question is the flow, its velocity and rate of change of velocity (acceleration/deceleration). MMT economists call attention to the fact that this is significant in tax policy as an aspect of countercyclical automatic stabilization. Therefore, trying to hit targets based on fiscal rules that apply to households and firms is wrong-headed, since government finance is the inverse of non-government finance.
Even when we stop consciously clinging to a false belief, we still need time to clean out subconscious residue from the false belief.
For example, people recognize that the “taxes drive money” mantra is a myth, since people know that we would continue to use dollars even if taxes were eliminated.
However the false belief that “taxes drive money” leaves a subconscious residue. In an attempt to justify this residue, people use contorted “reasoning,” all of which amounts to, “Yes it is false, but viewed in a certain way, it could sort of be seen as true.”
People do this because of subconscious residue. It takes time to clear it all out. A belief leaves an imprint on our subconscious minds, and we need time to erase it. Everyone progresses at his own pace.
All of us have had experiences in which we thought we had dropped a false belief, only to see residue from up it pop up randomly in our minds for months or even years afterward. It takes time to clean it all out.
Human beings are storytellers. Stories are both individual and socially embedded. People tend to associate with those that tell the same or similar stories.
Stories are structures for interpreting experience as "reality."
Create frameworks in terms of which experience is analyzed into "facts" that break the wholeness of experience. Thus people and groups telling different stories recognize "alternative facts."
This is quite evident to anyone keeping abreast of all the stories about current events both within the US and globally.
The different stories are stories of different "realities" based on "alternative facts." Thus, one groups fake news is another groups "facts" and vice versa.
While a certain amount of gaslighting may be taking place through propaganda, there are a lot of people living in different worlds constructed by their perspectival worldviews.
There is no overarching worldview to serve as a criterion of "truth."
This is not to say that there is disagreement over all the facts but rather over key "facts" that do double or triple duty as descriptions as well as values as criteria, and other types of rules such as prescriptive and performative.
The underlying logic of this is difficult for most to grasp because people and groups are caught up in their own stories as "reality."
This goes along with "perception is reality," that is, knowledge is perspectival.
Yes, I can be seen as a "postmodern" in this regard, but my view is based on philosophical logic as set forth in the work of Wittgenstein.
For example, even in physics, the hardest in the sense of most solid of the sciences, while all physicists are in agreement over the mathematical statement of quantum mechanics, there are different interpretations (stories) of what the math "means."
Moving to religion, literally thousands of different denominations, sects and schools of thought can arise from a single source (scripture). They all agree in general about the text but not over its interpretation and practical implications.
Same with economics, politics, etc. For example, in economics there are several major stories — classical, neoclassical, Keynesian, New Keynesian, Post Keynesianism, Austrian, Institutionalism, Marxist, Marxian, to cite a few of the major ones.
Kaivey, sure! I have a release website preview (a draft site so please forgive errors, and wording about book will change). I won't hit that July date, more like October. I am not spreading this around yet but thought you might like to see what's coming :) 1000 CASTAWAYS: How To Make An Economy...And How Not To (2018, Clint Ballinger)
"There is no overarching worldview to serve as a criterion of "truth."
That is only in the dialectic pov..
Remember Pontius Pilate: "what is truth?"... Pilate obviously a dialectic...
"Moving to religion, literally thousands of different denominations, sects and schools of thought can arise from a single source (scripture). They all agree in general about the text but not over its interpretation and practical implications."
That's because the church "fathers" brought in the dialectic... if they would have stayed didactic (under Paul) then this would not have happened... but had to happen anyway...
Here is an excerpt from the non-Scriptural Athanasian Creed they made up wrt the "Trinity!" doctrine:
"The Father eternal; the Son eternal; and the Holy Ghost eternal. And yet they are not three eternals; but one eternal. As also there are not three uncreated; nor three infinites, but one uncreated; and one infinite. So likewise the Father is Almighty; the Son Almighty; and the Holy Ghost Almighty. And yet they are not three Almighties; but one Almighty. So the Father is God; the Son is God; and the Holy Ghost is God. And yet they are not three Gods; "
No one competent or qualified in mathematics or science would ever have written something like this...
It makes NO sense whatsoever.... but is textbook dialectic method.... ie where the false can exist with impunity.. its dark...
""There is no overarching worldview to serve as a criterion of "truth.""
Tom its not a "worldview" that represents 'truth'...
You cant have conflicting statements and be in truth... iow you cant say "we're out of money!" and "we're not out of money" AT THE SAME TIME like we see these people doing all the time.. they are not "in truth"...
Gets back to "a house divided against itself cannot stand..." and our "house" ends up a shithole like it is when its run by all these morons who cannot put off the false and instead remain in the dialectic...
“Dollars only have value because they extinguish tax liabilities. Full stop.”
There it is again: the mental residue of a false belief. In this case, the idiotic claim that if taxes were reduced to zero, a dollar bill would suddenly be worthless, and could not be used to buy anything. One wonders what we did in the days before World War II when there was no federal withholding tax. One wonders what countries do that have no sales tax or income tax (there are several).
“Human beings are storytellers. Stories are both individual and socially embedded. People tend to associate with those that tell the same or similar stories.” ~ Tom Hickey
Yes. The word I used in previous comments is “narrative.” Control the social narrative, and you control the social mind, which means you control the world. It does not matter if the narrative does not align with empirically observed experience. If people believe the story, then for believers the story is “true.” If people believe that the sun moves across the sky in a chariot drawn by Apollo, then this is “true” for them, even though no one has ever seen Apollo. If people believe that “taxes drive money,” then it is “true” for them, even though money could still buy things if taxes did not exist.
Our story or narrative creates our reality, and we vigorously defend our story, since we are afraid to explore different realities. The world outside our cocoon is unknown, and therefore scary. For us, our little cocoon is absolute “reality.” “Full stop,” as one individual wrote above.
“The underlying logic of this is difficult for most to grasp because people and groups are caught up in their own stories as ‘reality’.”
Exactly. All of us have believed in one story, and later traded it for a different story. We start by believing in Santa Clause, and we later trade in Santa for Jesus, or Mohammed or whatever. Same nonsense; different form. Americans used to fear that there were “communists” behind every bush and under every bed. Now it’s “terrorists” and “racists” and “homophobes” and “vaccine deniers,” etc etc etc. Same nonsense; different form. Our story is our “reality.”
Here Tom in the Greek scriptures ‘truth’ is ‘alEtheia‘
https://en.m.wikipedia.org/wiki/Aletheia
It is a Greek word variously translated as "unclosedness", "unconcealedness", "disclosure" or "truth". The literal meaning of the word ἀ–λήθεια is "the state of not being hidden; the state of being evident." It also means factuality or reality.[1] It is the opposite of lethe, which literally means "oblivion", "forgetfulness", or "concealment"
“State of being evident”:
so you anti-war guys always go “they keep saying ‘we’re out of money!’ But then when the military needs munnie they just issue whatever munnie is needed”
Iow it becomes EVIDENT we’re not “out of money!” so in TRUTH we’re not out of money...
Iow it CANT be both which is allowed under the dialectic method... while the false would be revealed under the didactic method and just discarded...
This is why when you drive over a bridge it typically doesn’t fall down...
[1] Federal laws, plus a government that is willing and able to enforce those laws.
[2] Social habit and convention.
The two factors apply whether or not taxes are levied.
Your "taxes drive money" belief is a product of slavish devotion to what you personally regard as authority figures. It is like chanting the liturgy in a Catholic church.
Break free! You can do it. It just takes a bit of focus and sincerity.
“dialectic acquires a specialised meaning of a contradiction of ideas that serves as the determining factor in their interaction; comprising three stages of development: a thesis, giving rise to its reaction; an antithesis, which contradicts or negates the thesis; and the tension between the two being resolved by means of a synthesis.”
So they are trained in this method so they synthesize the two; 1 the thesis and 2 the anti-thesis and we can see them operating under both thesis and anti-thesis AT THE SAME TIME.... through this synthsization process...
For me, it seems like it’s just a filter in the mind?
If mind is programmed ‘out of money’ then the person sees out of money. If mind is programmed ‘not out of money’ then the person sees not out of money. If mind is not programmed about money at all, then the person sees no issue, has no concept of money. This, all regardless whether or not there is a pile of money sitting on the shelf somewhere. Everything seen through the filters in the mind.
So, nothing to do with truth – just programming. One mind could contain all three versions quite happily if there was no connection between them; which happens too. Still just programming; nothing unusual there.
Matt – carrying argumentation to a philosopher is like carrying ice to the Eskimos, coal to Newcastle, is it not – although I admire your persistence I wonder what you are driving at? Restless mind ...?
How do you sit with the idea of the heart being the organ of vision?
That Polish 96 year old p.o.w. who passed I mentioned (another conversation): - he could have been a GP in Poland but fled to Aus, got labelled as a ‘wog’, learnt a little English and found a job welding on hydro electric projects. Saved up his money and the very first thing he did was buy a new suit and pair of shoes; his way of restoring his human dignity after the deprivation of the p.o.w. camp. Another favourite saying besides ‘Life is beautiful’ was ‘my house is your house’ – he provided shelter to people. He knew what want was and he knew what human was. Was that didactic or dialectic? Nope – nothing to do with mind at all. All to do with Being. All to do with how he felt, and experience. From that feeling, he built his own filters in his mind; just as good as anybody else’s.
Tom’s reminder worth repeating every day:
"Keep your heart with all vigilance, for from it flow the springs of life." — Proverbs 4:23 (NRSV)
Konrad might as well have written "A national currency is backed Federal laws to tax plus a government that is willing and able to enforce those laws." Lol
jr, I'm not arguing with Tom he has taught me a lot over the years here... Ive never studied Philosphy or Psychology or any of that stuff I've studied material systems only...
Tom has identified this dialectic method for me and I'm contrasting that method with the other side of the coin, ie didactic method, and looking at how and to whom each is applied in our society... it is starting to appear to me that the method matters substantially to the discipline...
You guys think all of these people are smart and crafty and are operating this big "neoliberal conspiracy!" while I take the position that they are actually stupid (incompetent if you prefer...) and we have a big cognitive deficiency currently operating in the matters related to our economic policy and I want to diagnose it... how/why did this happen?
education process employed by the academe on people that end up in positions of authority related to our economic policy imo should be on the table and investigated... we arent born this way we are taught/trained...
You try to use dialectic method in material systems and you will end up blowing yourself up...
we will have to eventually get on top of it materially ("peace and security" 1 thess) before we can get to the level of a more unified consciousness you guys posses and long for the others.. its a process... and we need to bring our A game if we're going to figure it out... Arts majors (dialectics) need not apply imo...
I have never doubted your (and most commenter’s) sincerity Matt, and believe I understand and appreciate your investigation of dialectic and didactic, conspiracy and competency, education and authority, clarity and cognitive dissonance, teaching and training (notice the oppositional interplay in these) - their pointed application to material systems; and your belief that we have to deal with these first, before peace is possible - Art majors need not apply :-)! It’s good to remember that in the end, using the intellectual function is like trying to find your way from one side of the universe to another, with a flashlight. Sure it can throw a little light on the material world around you and speculate about the rest. Or you can sit in a corner and sulk and drink beer.
For me, in the One human being, there are three primary aspects: - Will, Love, Intelligence – although most people talk only of ‘right’ and ‘left’ and their corollaries; with force wielded more familiarly by the right. I think we humans are learning to unfold and integrate these energies into a personality, society being an expression of this in aggregate. I see human problems as incomplete emergence of these energies, and obvious disharmony (lack of integration) in what has emerged. I see these energies as evolutionary, significantly - often at war in the human being, the greatest dichotomy being between personality and the self. This ‘key’ goes a long way towards unlocking the complexity of human affairs - for me.
To use a simple analogy, the primary aspects are three legs on a stool: - and because one leg is shorter than another in some way, or troubled in some way, we fall off. You are hard at work on the Intelligence leg by focus, but the other two are working their magic too.
And of course I will make apparently veiled and incoherent statements such as ‘mind is not the tool for the job’ or ‘looking through the filters in the mind will distort the reality’ etc. (to me this is like saying sky is blue and earth green). What I really mean is that mind alone is not up to the job: - I am not dismissing the Intelligence leg. I am trying to argue for more recognition, inclusion, understanding and integration of the other two; and point to a renewal, the pouring in of new energy, to refresh vision, clean out the stables for the Intelligence leg. This energy in a human being arises in the heart and is quite capable of transmuting, transforming, and transcending the human personality – arriving at knowledge of the Self. It adds, does not subtract. It clarifies, does not obscure. In other very simple words, and in regard to the human personality, to say that feeling in a human being is actually more important, more instructive, than thinking. (I say that to educators and watch as the light bulb fuses). As kids we learnt everything through feeling – until we had to go to school. Through feeling, we can learn how to be human and so much more. The mind is a witness and changes accordingly and automatically: - materially I would say this energy of the heart builds new material into the mind, allowing it to accommodate thought with a higher energy content, remodelling the plastic brain as a result.
For me, this new energy originates from the Will aspect and pours through the Love aspect – the heart in a human being. Only an integrated human being, at peace with themselves and not warring in their parts, can build an integrated and peaceful world. The goal is integration, peace that is felt by the heart and made manifest; understanding the process of how that happens in a human being, and assisting in the task. We do not have to save the world – it doesn’t need saving. We are the ones screwing it up and need saving (from ourselves) - so look to this integration in yourself first and then find a way to express it in the external world.
In the spirit of open conversation then, I think there are better and more direct ways to achieve a peaceful society, than through materialism (of which I see most minds are slave) and the armed forces (the way of Empire and tears – as slave to mind). Humans have been working through the vehicle of Empire and it’s earlier, milder, forms for millennia, and failed miserably; the outcome will not change. Always the focus is on the material Intelligence leg, in the form of an ideology or intellection; these days a system or a thought-form soon becomes a religion or v.v. Everywhere, there is incredible stress and it affects people. The cities, blaze with light, activity, noise – nonstop - while incredible amounts of resources are directed to warfare. How many resources, human or material, are directed to peace?
”No problem can be solved from the same consciousness that created it. We must learn to see the world anew.” [Albert Einstein]
What is essential is invisible to the eye. It is only with the heart that one can see clearly. [Antoine St Exupery] 1930 AD
Like you, I haven’t studied philosophy or psychology either, and ditto to learning from Tom whose mind is very human, gentle, broad and informed {even philosophical :-); my guess is you may owe more to Tom than you realise}: - but you can’t tell me any one here doesn’t love a good argument – and nothing wrong with that! Unfortunately, I haven’t studied material systems like you Matt, just architecture and esotericism, so I’m way behind in that regard; unqualified! I figure it’s your job and people like you to come up with the solutions. Please keep working on it.
My contribution to the conversation is to elucidate the view (and it is only a point of view in terms of Intelligence leg) of perception of the heart; that not all learning comes from the mind, but the most important things we can learn come from feeling; and how that can add to the Intelligence quotient. And point out the essential unity of the three primary aspects - the way of the heart leading to self-knowledge. Will is what pushes the universe to evolve and everything in it. To use masonic word symbols, It is Power, using the architectural energy of Love-Wisdom, building in a material world that is actually energy and not material at all – imbued with Intelligence. In this world you are a conscious living being. What do you want?
I found the Jung quote I had in mind: ”Your vision will become clear only when you look into your heart. Who looks outside dreams; who looks within, awakens.” [Carl Jung 1900]
A few more to illustrate the point:
”We think too much and feel too little. More than machinery, we need humanity. More than cleverness, we need kindness and gentleness.” [Charlie Chaplin]
”The purpose of life is to increase the warm heart. Without inner peace it is impossible to have world peace.” [Dalai Lama]
”Love is wisdom’s law on earth.” [Ingmar Bergman 1950]
”Gamble everything for love, if you are a true human being.” [Rumi 1200]
”All we are saying is give peace a chance.” [John Lennon]
”Only in the heart can one experience the divine presence of truth.” [Kabir 1400]
”I have walked this earth for thirty years, and, out of gratitude, want to leave some souvenir.” [Van Gogh 1850]
”You cannot depend upon your eyes when your imagination is out of focus.” [Mark Twain]
”The heart has no curiosity – the heart wants to know. There is no greater ignorance than not knowing the self”. [Prem Rawat]
So, awaken the heart and mind will automatically build a better world: - but I agree, a bridge can be built from both sides
“Supply-side theory, among other things, holds that a cut in tax rates will stimulate the economy and thus generate even greater tax revenues.”
ReplyDeleteAs though the U.S. government needs tax revenues.
Supply-side theory is not a theory, but a bullshit claim that if we give everything to the rich, then some of the crumbs will “trickle down” to the lower classes. What actually happens is that the rich keep whatever they are given. They even work to cut social programs that they do not pay one penny for (e.g. Medicare and Social Security).
Reagan was an evil liar.
Actually, the MMT economists would agree with Ibn Khaldun, with qualifications, e.g., sovereign currency issuer that doesn't undertake financial obligations in a currency it doesn't issue doesn't is sefl-funding and doesn't need to taxes for fund itself. That said, taxes not only create demand for the currency in non-government but taxes also withdraw purchasing power from non-government. Since inflation is a financial constraint, governments can use tax policy for inflation control.
ReplyDeleteWarren Mosler, especially, as argued that taxes in the US are higher than they need to be to control inflation and they can and should be reduced to stimulate a lagging demand and increase investment. This would result in lower unemployment.
Other MMT economists (can't recall the detains offhand) have argued that the tax rate needs to be set correctly, since taxation is part of automatic stabilization and acts countercyclically wrt to both stimulus in contractions and inflation control in expansions. Presently, the tax rate is higher than it needs to be which tends to dampen expansions too quickly.
So Ibn Khaldun was correct in principle, but the how and why is controversial. MMT explains both.
The Laffer curve is correct in principle, too. It's the application that has missed the mark since those applying it lack the nuance of understanding that MMT provides.
Failure to understand this is also way most progressives also miss the mark badly.
If you never had to pay taxes, would you stop wanting or using dollars? No. The demand for currency would continue with or without taxes. Therefore taxes do not create demand for currency.
ReplyDeleteEvidently MMT people get stuck in ruts, just like other people. They hear something from an “authority figure” (e.g. the false mantra that “taxes drive money”) and they cling to it as infallible gospel.
Oh well. It’s all part of the learning process.
If you never had to pay taxes, would you stop wanting or using dollars? No. The demand for currency would continue with or without taxes. Therefore taxes do not create demand for currency.
ReplyDeleteThe MMT economist emphasize that claiming "taxes drive state money" should be take in the sense that taxation is a sufficient condition for creating demand for a currency but not a necessary one.
They also say that once a currency is in wide use, demand becomes established, although taxation will maintain the need to obtain it in case pressure on the currency arises, preventing it from becoming worthless (purchasing power, hence value, falling to zero).
However, there is reason to think that this is more a "principle" rather than a statement that has an empirical warrant to support it.
I suspect that you know I am correct, but you are looking for a way to imagine that I am not correct. That’s okay.
ReplyDeleteI just ask people to not believe everything that “authority figures” claim.
I once emailed L. Randall Wray about this. It was just one message with a reply from him, but he became angry that I dared to question one of his assertions.
Anyway this “taxes drive money” issue would be trivial if MMT people did not repeatedly emphasize it in their articles and presentations.
The “taxes drive money” mantra indirectly supports the myth that the federal government needs tax revenue, and hence there is “no money” for social programs.
I don't know whether you are correct. I am not an economist and don't have the background necessary to comment on it myself. I can only repeat what I have heard from the MMT economists.
ReplyDeleteMy question from the logical pov and that of philosophy of science is about the justification for the claim. I haven't seen anything on this, but I haven't researched it.
One reason I haven't is that I don't have access to articles that are behind a paywall and that includes much of the relevant information in econ. In addition, many of the books that are relevant are priced to high to purchase for a purpose I don't regard as essential.
I can understand where Randy and the other MMT economists are coming from that are working in the field of theory of money. So chartalism is important to them in countering opposing theories of money.
The further question is whether it is optimal strategy, as MMT economists apparently accept, to feature the chartalist theory as fundamental to MMT in approaching how to frame the debate to the advantage of MMT.
taxes also withdraw purchasing power from non-government. Since inflation is a financial constraint, governments can use tax policy for inflation control.
ReplyDeleteUnfortunately, taxes are not used effectively for either purpose. They are used to increase purchasing power of selective non-government entities and decrease the purchasing power of selected targets. Inflation control is left to largely ineffective interest rates that are primarily used by non-government entities for profit.
For the record, Reagan cut taxes on the rich, raised taxes on everyone else, and engaged in massive deficit spending (tripling the national debt in his two terms) that generated increased tax revenue. Neoliberals utterly ignore the deficit spending and claim the tax cuts as the source of increased tax revenue. As if pumping trillions of dollars into the economy would not generate taxes ...
This comment has been removed by the author.
ReplyDelete[above is my reply to Konrad, the opening quote is by him to be clear! :) ]
ReplyDelete
ReplyDeleteKonrad wrote:
“The “taxes drive money” mantra indirectly supports the myth that the federal government needs tax revenue, and hence there is “no money” for social programs.”
……………...
[My reply in a nutshell: Household Analogy = HALF true, the BUSINESS Analogy = 100% False.]
Konrad - It is the myth that governments need to sell bonds that makes the public think there is “no money” because we are in “Debt”.
…
The government token/tax-credit system is the system the people use to coordinate group projects; it incidentally gives rise to tax-credits tradeable as “money”. Taxes are indeed what drive this part of the currency system. No, tax receipts do not need to match 1:1. But there does have to be a well thought out and executed taxation system that maintains the price level (value of the government token).
Taxes don't pay for anything, but they absolutely do drive the currency.
BONDS do nothing at all and are the worst offender for confusing the public with the concept of “debt”.
Rather that the “False Household Analogy” on taxes, I think of it as the “False Business Analogy” (that a sovereign government ever needs to fund itself with bonds).
The Household Analogy is only half false – taxes are not the source of funds, but they do indeed give value to the government token.
The BUSINESS Analogy is TOTALLY false. Sovereign governments never need to sell bonds and are never in “debt” via bond sales in their own currency.
Really we should all bang on about the False Business Analogy more.
(I am writing a short book on this, and it will distinguish the False Household Analogy from the False Business Analogy – as far as I know the FBA has not been a common distinction from the FHA but it should be).
That book sounds interesting, Clint, let people here know when it is out?
DeleteAs if pumping trillions of dollars into the economy would not generate taxes ...
ReplyDeleteGovernment spending becomes someone's income and owing to flows, it is often many people's incomes. Much of the injection is therefore taxed back, although in aggregate that which is not taxed back is saved in tsys as the deficit, available for funding future taxes. So government provides the funds that are eventually repaid in taxes.
The question is the flow, its velocity and rate of change of velocity (acceleration/deceleration). MMT economists call attention to the fact that this is significant in tax policy as an aspect of countercyclical automatic stabilization. Therefore, trying to hit targets based on fiscal rules that apply to households and firms is wrong-headed, since government finance is the inverse of non-government finance.
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ReplyDeleteBeliefs and the mind
Even when we stop consciously clinging to a false belief, we still need time to clean out subconscious residue from the false belief.
For example, people recognize that the “taxes drive money” mantra is a myth, since people know that we would continue to use dollars even if taxes were eliminated.
However the false belief that “taxes drive money” leaves a subconscious residue. In an attempt to justify this residue, people use contorted “reasoning,” all of which amounts to, “Yes it is false, but viewed in a certain way, it could sort of be seen as true.”
People do this because of subconscious residue. It takes time to clear it all out. A belief leaves an imprint on our subconscious minds, and we need time to erase it. Everyone progresses at his own pace.
All of us have had experiences in which we thought we had dropped a false belief, only to see residue from up it pop up randomly in our minds for months or even years afterward. It takes time to clean it all out.
Human beings are storytellers. Stories are both individual and socially embedded. People tend to associate with those that tell the same or similar stories.
ReplyDeleteStories are structures for interpreting experience as "reality."
Create frameworks in terms of which experience is analyzed into "facts" that break the wholeness of experience. Thus people and groups telling different stories recognize "alternative facts."
This is quite evident to anyone keeping abreast of all the stories about current events both within the US and globally.
The different stories are stories of different "realities" based on "alternative facts." Thus, one groups fake news is another groups "facts" and vice versa.
While a certain amount of gaslighting may be taking place through propaganda, there are a lot of people living in different worlds constructed by their perspectival worldviews.
There is no overarching worldview to serve as a criterion of "truth."
This is not to say that there is disagreement over all the facts but rather over key "facts" that do double or triple duty as descriptions as well as values as criteria, and other types of rules such as prescriptive and performative.
The underlying logic of this is difficult for most to grasp because people and groups are caught up in their own stories as "reality."
This goes along with "perception is reality," that is, knowledge is perspectival.
Yes, I can be seen as a "postmodern" in this regard, but my view is based on philosophical logic as set forth in the work of Wittgenstein.
For example, even in physics, the hardest in the sense of most solid of the sciences, while all physicists are in agreement over the mathematical statement of quantum mechanics, there are different interpretations (stories) of what the math "means."
ReplyDeleteScientific American
The Many Interpretations of Quantum Mechanics
Graham P. Collins on November 19, 2007
Moving to religion, literally thousands of different denominations, sects and schools of thought can arise from a single source (scripture). They all agree in general about the text but not over its interpretation and practical implications.
Same with economics, politics, etc. For example, in economics there are several major stories — classical, neoclassical, Keynesian, New Keynesian, Post Keynesianism, Austrian, Institutionalism, Marxist, Marxian, to cite a few of the major ones.
Konrad wrote "since people know that we would continue to use dollars even if taxes were eliminated.
ReplyDeleteNo, we wouldn't.
Dollars only have value because they extinguish tax liabilities. Full stop.
Kaivey, sure! I have a release website preview (a draft site so please forgive errors, and wording about book will change).
ReplyDeleteI won't hit that July date, more like October. I am not spreading this around yet but thought you might like to see what's coming :)
1000 CASTAWAYS: How To Make An Economy...And How Not To (2018, Clint Ballinger)
People are using Bitcoin and there is no taxes in Bitcoin... they are libertarians...
ReplyDeleteWhich supports both K's point (use Bitcoin while no taxes) and C's point (people can exit use of USDs)...
"There is no overarching worldview to serve as a criterion of "truth."
ReplyDeleteThat is only in the dialectic pov..
Remember Pontius Pilate: "what is truth?"... Pilate obviously a dialectic...
"Moving to religion, literally thousands of different denominations, sects and schools of thought can arise from a single source (scripture). They all agree in general about the text but not over its interpretation and practical implications."
That's because the church "fathers" brought in the dialectic... if they would have stayed didactic (under Paul) then this would not have happened... but had to happen anyway...
Here is an excerpt from the non-Scriptural Athanasian Creed they made up wrt the "Trinity!" doctrine:
"The Father eternal; the Son eternal; and the Holy Ghost eternal. And yet they are not three eternals; but one eternal. As also there are not three uncreated; nor three infinites, but one uncreated; and one infinite. So likewise the Father is Almighty; the Son Almighty; and the Holy Ghost Almighty. And yet they are not three Almighties; but one Almighty. So the Father is God; the Son is God; and the Holy Ghost is God. And yet they are not three Gods; "
No one competent or qualified in mathematics or science would ever have written something like this...
It makes NO sense whatsoever.... but is textbook dialectic method.... ie where the false can exist with impunity.. its dark...
""There is no overarching worldview to serve as a criterion of "truth.""
ReplyDeleteTom its not a "worldview" that represents 'truth'...
You cant have conflicting statements and be in truth... iow you cant say "we're out of money!" and "we're not out of money" AT THE SAME TIME like we see these people doing all the time.. they are not "in truth"...
Gets back to "a house divided against itself cannot stand..." and our "house" ends up a shithole like it is when its run by all these morons who cannot put off the false and instead remain in the dialectic...
Matt - people aren't really "using" bitcoin.
ReplyDeleteAnyway, my take on that (and relates to Konrad as well)
Of Bitcoins and Balance Sheets: The Real Lesson From Bitcoin
“Dollars only have value because they extinguish tax liabilities. Full stop.”
ReplyDeleteThere it is again: the mental residue of a false belief. In this case, the idiotic claim that if taxes were reduced to zero, a dollar bill would suddenly be worthless, and could not be used to buy anything. One wonders what we did in the days before World War II when there was no federal withholding tax. One wonders what countries do that have no sales tax or income tax (there are several).
That’s okay. Each of us evolves at his own pace.
K there are tariffs, excise taxes, fees, etc these are all lawful Federal pecuniary obligations payable only via transfer of USD balances...
ReplyDeleteClint the crypto is big with the libertarians who are anti-law... tax evaders, etc...
ReplyDeleteIow when you say “taxes drive the currency” , those people don’t like that... they are biased anti-authority...
ReplyDelete“Human beings are storytellers. Stories are both individual and socially embedded. People tend to associate with those that tell the same or similar stories.” ~ Tom Hickey
ReplyDeleteYes. The word I used in previous comments is “narrative.” Control the social narrative, and you control the social mind, which means you control the world. It does not matter if the narrative does not align with empirically observed experience. If people believe the story, then for believers the story is “true.” If people believe that the sun moves across the sky in a chariot drawn by Apollo, then this is “true” for them, even though no one has ever seen Apollo. If people believe that “taxes drive money,” then it is “true” for them, even though money could still buy things if taxes did not exist.
Our story or narrative creates our reality, and we vigorously defend our story, since we are afraid to explore different realities. The world outside our cocoon is unknown, and therefore scary. For us, our little cocoon is absolute “reality.” “Full stop,” as one individual wrote above.
“The underlying logic of this is difficult for most to grasp because people and groups are caught up in their own stories as ‘reality’.”
Exactly. All of us have believed in one story, and later traded it for a different story. We start by believing in Santa Clause, and we later trade in Santa for Jesus, or Mohammed or whatever. Same nonsense; different form. Americans used to fear that there were “communists” behind every bush and under every bed. Now it’s “terrorists” and “racists” and “homophobes” and “vaccine deniers,” etc etc etc. Same nonsense; different form. Our story is our “reality.”
Konrad...I believe if you don't pay your taxes you'll know what's what ;)
ReplyDelete"dollar bill would suddenly be worthless"
ReplyDeleteNah, it would take a little time.
And when gov said taxes must be paid in corn chips instead, the corn chip would replace the dollar, yes, suddenly.
I think Konrad doesn't fully understand the "monopoly on force" part of sovereignty.
Here Tom in the Greek scriptures ‘truth’ is ‘alEtheia‘
ReplyDeletehttps://en.m.wikipedia.org/wiki/Aletheia
It is a Greek word variously translated as "unclosedness", "unconcealedness", "disclosure" or "truth". The literal meaning of the word ἀ–λήθεια is "the state of not being hidden; the state of being evident." It also means factuality or reality.[1] It is the opposite of lethe, which literally means "oblivion", "forgetfulness", or "concealment"
“State of being evident”:
so you anti-war guys always go “they keep saying ‘we’re out of money!’ But then when the military needs munnie they just issue whatever munnie is needed”
Iow it becomes EVIDENT we’re not “out of money!” so in TRUTH we’re not out of money...
Iow it CANT be both which is allowed under the dialectic method... while the false would be revealed under the didactic method and just discarded...
This is why when you drive over a bridge it typically doesn’t fall down...
“I think Konrad doesn't fully understand the "monopoly on force" part of sovereignty.”
ReplyDeleteHe’s probably biased libertarian..
A national currency is backed by two things:
ReplyDelete[1] Federal laws, plus a government that is willing and able to enforce those laws.
[2] Social habit and convention.
The two factors apply whether or not taxes are levied.
Your "taxes drive money" belief is a product of slavish devotion to what you personally regard as authority figures. It is like chanting the liturgy in a Catholic church.
Break free! You can do it. It just takes a bit of focus and sincerity.
Tom here from the wiki on dialectic method:
ReplyDelete“dialectic acquires a specialised meaning of a contradiction of ideas that serves as the determining factor in their interaction; comprising three stages of development: a thesis, giving rise to its reaction; an antithesis, which contradicts or negates the thesis; and the tension between the two being resolved by means of a synthesis.”
So they are trained in this method so they synthesize the two; 1 the thesis and 2 the anti-thesis and we can see them operating under both thesis and anti-thesis AT THE SAME TIME.... through this synthsization process...
For me, it seems like it’s just a filter in the mind?
ReplyDeleteIf mind is programmed ‘out of money’ then the person sees out of money. If mind is programmed ‘not out of money’ then the person sees not out of money. If mind is not programmed about money at all, then the person sees no issue, has no concept of money. This, all regardless whether or not there is a pile of money sitting on the shelf somewhere. Everything seen through the filters in the mind.
So, nothing to do with truth – just programming. One mind could contain all three versions quite happily if there was no connection between them; which happens too. Still just programming; nothing unusual there.
Matt – carrying argumentation to a philosopher is like carrying ice to the Eskimos, coal to Newcastle, is it not – although I admire your persistence I wonder what you are driving at? Restless mind ...?
How do you sit with the idea of the heart being the organ of vision?
That Polish 96 year old p.o.w. who passed I mentioned (another conversation): - he could have been a GP in Poland but fled to Aus, got labelled as a ‘wog’, learnt a little English and found a job welding on hydro electric projects. Saved up his money and the very first thing he did was buy a new suit and pair of shoes; his way of restoring his human dignity after the deprivation of the p.o.w. camp. Another favourite saying besides ‘Life is beautiful’ was ‘my house is your house’ – he provided shelter to people. He knew what want was and he knew what human was. Was that didactic or dialectic? Nope – nothing to do with mind at all. All to do with Being. All to do with how he felt, and experience. From that feeling, he built his own filters in his mind; just as good as anybody else’s.
Tom’s reminder worth repeating every day:
"Keep your heart with all vigilance, for from it flow the springs of life."
— Proverbs 4:23 (NRSV)
Konrad might as well have written "A national currency is backed Federal laws to tax plus a government that is willing and able to enforce those laws." Lol
ReplyDeletejr, I'm not arguing with Tom he has taught me a lot over the years here... Ive never studied Philosphy or Psychology or any of that stuff I've studied material systems only...
ReplyDeleteTom has identified this dialectic method for me and I'm contrasting that method with the other side of the coin, ie didactic method, and looking at how and to whom each is applied in our society... it is starting to appear to me that the method matters substantially to the discipline...
You guys think all of these people are smart and crafty and are operating this big "neoliberal conspiracy!" while I take the position that they are actually stupid (incompetent if you prefer...) and we have a big cognitive deficiency currently operating in the matters related to our economic policy and I want to diagnose it... how/why did this happen?
education process employed by the academe on people that end up in positions of authority related to our economic policy imo should be on the table and investigated... we arent born this way we are taught/trained...
You try to use dialectic method in material systems and you will end up blowing yourself up...
we will have to eventually get on top of it materially ("peace and security" 1 thess) before we can get to the level of a more unified consciousness you guys posses and long for the others.. its a process... and we need to bring our A game if we're going to figure it out... Arts majors (dialectics) need not apply imo...
For Matt:
ReplyDeleteI have never doubted your (and most commenter’s) sincerity Matt, and believe I understand and appreciate your investigation of dialectic and didactic, conspiracy and competency, education and authority, clarity and cognitive dissonance, teaching and training (notice the oppositional interplay in these) - their pointed application to material systems; and your belief that we have to deal with these first, before peace is possible - Art majors need not apply :-)! It’s good to remember that in the end, using the intellectual function is like trying to find your way from one side of the universe to another, with a flashlight. Sure it can throw a little light on the material world around you and speculate about the rest. Or you can sit in a corner and sulk and drink beer.
For me, in the One human being, there are three primary aspects: - Will, Love, Intelligence – although most people talk only of ‘right’ and ‘left’ and their corollaries; with force wielded more familiarly by the right. I think we humans are learning to unfold and integrate these energies into a personality, society being an expression of this in aggregate. I see human problems as incomplete emergence of these energies, and obvious disharmony (lack of integration) in what has emerged. I see these energies as evolutionary, significantly - often at war in the human being, the greatest dichotomy being between personality and the self. This ‘key’ goes a long way towards unlocking the complexity of human affairs - for me.
To use a simple analogy, the primary aspects are three legs on a stool: - and because one leg is shorter than another in some way, or troubled in some way, we fall off. You are hard at work on the Intelligence leg by focus, but the other two are working their magic too.
And of course I will make apparently veiled and incoherent statements such as ‘mind is not the tool for the job’ or ‘looking through the filters in the mind will distort the reality’ etc. (to me this is like saying sky is blue and earth green). What I really mean is that mind alone is not up to the job: - I am not dismissing the Intelligence leg. I am trying to argue for more recognition, inclusion, understanding and integration of the other two; and point to a renewal, the pouring in of new energy, to refresh vision, clean out the stables for the Intelligence leg. This energy in a human being arises in the heart and is quite capable of transmuting, transforming, and transcending the human personality – arriving at knowledge of the Self. It adds, does not subtract. It clarifies, does not obscure. In other very simple words, and in regard to the human personality, to say that feeling in a human being is actually more important, more instructive, than thinking. (I say that to educators and watch as the light bulb fuses). As kids we learnt everything through feeling – until we had to go to school. Through feeling, we can learn how to be human and so much more. The mind is a witness and changes accordingly and automatically: - materially I would say this energy of the heart builds new material into the mind, allowing it to accommodate thought with a higher energy content, remodelling the plastic brain as a result.
For me, this new energy originates from the Will aspect and pours through the Love aspect – the heart in a human being. Only an integrated human being, at peace with themselves and not warring in their parts, can build an integrated and peaceful world. The goal is integration, peace that is felt by the heart and made manifest; understanding the process of how that happens in a human being, and assisting in the task. We do not have to save the world – it doesn’t need saving. We are the ones screwing it up and need saving (from ourselves) - so look to this integration in yourself first and then find a way to express it in the external world.
(cont) ...
In the spirit of open conversation then, I think there are better and more direct ways to achieve a peaceful society, than through materialism (of which I see most minds are slave) and the armed forces (the way of Empire and tears – as slave to mind). Humans have been working through the vehicle of Empire and it’s earlier, milder, forms for millennia, and failed miserably; the outcome will not change. Always the focus is on the material Intelligence leg, in the form of an ideology or intellection; these days a system or a thought-form soon becomes a religion or v.v. Everywhere, there is incredible stress and it affects people. The cities, blaze with light, activity, noise – nonstop - while incredible amounts of resources are directed to warfare. How many resources, human or material, are directed to peace?
ReplyDelete”No problem can be solved from the same consciousness that created it. We must learn to see the world anew.” [Albert Einstein]
What is essential is invisible to the eye. It is only with the heart that one can see clearly. [Antoine St Exupery] 1930 AD
Like you, I haven’t studied philosophy or psychology either, and ditto to learning from Tom whose mind is very human, gentle, broad and informed {even philosophical :-); my guess is you may owe more to Tom than you realise}: - but you can’t tell me any one here doesn’t love a good argument – and nothing wrong with that! Unfortunately, I haven’t studied material systems like you Matt, just architecture and esotericism, so I’m way behind in that regard; unqualified! I figure it’s your job and people like you to come up with the solutions. Please keep working on it.
My contribution to the conversation is to elucidate the view (and it is only a point of view in terms of Intelligence leg) of perception of the heart; that not all learning comes from the mind, but the most important things we can learn come from feeling; and how that can add to the Intelligence quotient. And point out the essential unity of the three primary aspects - the way of the heart leading to self-knowledge. Will is what pushes the universe to evolve and everything in it. To use masonic word symbols, It is Power, using the architectural energy of Love-Wisdom, building in a material world that is actually energy and not material at all – imbued with Intelligence. In this world you are a conscious living being. What do you want?
I found the Jung quote I had in mind:
”Your vision will become clear only when you look into your heart. Who looks outside dreams; who looks within, awakens.” [Carl Jung 1900]
A few more to illustrate the point:
”We think too much and feel too little. More than machinery, we need humanity. More than cleverness, we need kindness and gentleness.” [Charlie Chaplin]
”The purpose of life is to increase the warm heart. Without inner peace it is impossible to have world peace.” [Dalai Lama]
”Love is wisdom’s law on earth.” [Ingmar Bergman 1950]
”Gamble everything for love, if you are a true human being.” [Rumi 1200]
”All we are saying is give peace a chance.” [John Lennon]
”Only in the heart can one experience the divine presence of truth.” [Kabir 1400]
”I have walked this earth for thirty years, and, out of gratitude, want to leave some souvenir.” [Van Gogh 1850]
”You cannot depend upon your eyes when your imagination is out of focus.” [Mark Twain]
”The heart has no curiosity – the heart wants to know. There is no greater ignorance than not knowing the self”. [Prem Rawat]
So, awaken the heart and mind will automatically build a better world: - but I agree, a bridge can be built from both sides