Saturday, August 25, 2018

Charles Adams — Fiscal policy is a matter of life and death


And he also talks about rent extraction!
"So why are UK politicians obsessed with balancing the books rather than helping their citizens to lead healthier lives? The answer seems to be that the many UK politicians are strongly influenced by the desires of a powerful financial sector. While a finance sector is important, it is also predominantly a rent extraction industry. It mainly acquires wealth either on the backs of other people’s labour or their debts (interest).
Progressive Pulse (UK)
Fiscal policy is a matter of life and death
Charles Adams | Professor of Physics at the University of Durham
ht Ralph Musgrave

Charles Adams also teachers econophysics.


Konrad said...

“Fiscal policy is a matter of life and death.”

Yes. For example, I say that austerity is genocide, since it kills vast numbers of people.

“Although MMT is the most coherent body of thought on how our modern fiat money system actually works, it still provokes controversy, partly because it is not completely understood.”

It provokes controversy because most politicians are liars, and most people defend the lies.

“It is often attacked by mainstream economists.”

Of course, since they too are liars. They have to be if they want to keep their jobs.

“This data supports the MMT thesis that government debt is not the most important parameter in determining economic outcomes and wellbeing.”

What’s irrelevant is government debt in the government’s own currency.

“So why are UK politicians obsessed with balancing the books rather than helping their citizens to lead healthier lives?”

Politicians are paid by the rich to continually widen the gap between the rich and the rest, and to continually drive the lower classes further and further into private debt bondage.

“All money is created in the form of debt so the economy need debtors as much as it needs money.”

All money is both a debt and a credit, but this does not mean that all money is loanmoney.

“The finance sector prefers private debtors to government debt because it can extract a higher rent (a higher interest rate). We can do some simple sums to illustrate how this works.”

Central government “debt” is also government assets. Private debt pays more profits, but central government debt is more secure, since there is no possibility of default. That’s why various parties have deposited over $20 trillion into Fed savings accounts. Also, bankers and financiers lend to all levels of government, both national and local.

“Let’s says the economy is doing great and growing at 3% a year and inflation is 2% per year. This means that we need 5% more money and so 5% more debt, just to keep the money supply and total debt to GDP levels stable.”

WRONG. If the central government decides to create 5% more money out of thin air, this does not mean the government must borrow it, and thereby go 5% more into debt.

Also, for governments that create their own currency, their government debt-to-GDP ratio is trivial and meaningless when the debt is in their own currency.

This author perhaps means well, but he is confused.

Andrew Anderson said...

All money is both a debt and a credit, Konrad

I beg to defer. Please note that Equity is on the same side of the balance sheet as Liabilities and is backed by Assets MINUS Liabilities. Thus shares in Equity, common stock, is as valid a PRIVATE money form as Liabilities are, given positive Equity.

But why should those with Equity "share" it, when government privileges for deposits/credits/liabilities creation render the liability aspect largely a sham toward the non-bank private sector? Thus allowing the most so-called creditworthy, those with Equity, along with the banks themselves, to legally steal rather than share?

Andrew Anderson said...

Make that "I beg to differ", please.

Konrad said...

I have no idea what you are talking about (do you?) but a dollar is a unit of account. It represents one dollar's worth of "full faith and credit" of the United States. Whoever has that dollar has a credit for one dollar.

For every credit there is a debt, and vice-versa. Who is in debt to the holder of the dollar? Everyone who agrees that the dollar is worth a dollar. That is, everyone who agrees to honor the holder's credit for one dollar.

A debt is an acknowledgement of a credit. As I noted previously, debts and credits do not necessarily involve loans. All money is both a credit and a debt.

Andrew Anderson said...

"So why are UK politicians obsessed with balancing the books rather than helping their citizens to lead healthier lives? Charles Adams

The money-multiplier theory is discredited yet deficit spending by the monetary sovereign can spur a credit boom and provide the necessary interest for it.

And guess who'll be blamed for the price inflation once the output gap is closed? Hint: Not government privileges for the usury cartel.