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, February 14, 2019
Michael Lebowitz — Modern Monetary Theory and its Fictional Discipline
Michael Liebowitz makes up his own theory of inflation to criticize MMT and the inflation constraint.
That's about the hundredth critic of MMT who has got the impression that MMT claims money printing can pay for anything. So how come they've got that impression?
The answer is that that's the impression anyone might reasonably get from reading some of Stephanie Kelton and Pavlina Tcherneva's material. Obviously if you look in the small print produced by Kelton and Tcherneva you can see that's not what they're saying. But K&T need to understand that many people just don't look at the small print.
I was predicting a year or two ago that "Kelton & Tcherneva talk" would lead to trouble. That's exactly what has happened.
What Ralph is saying is that lazy brains like Lebowitz shall continuously be fed with a silver spoon. Those who believes that should step up to the plate and start feed them.
Dear idiots, government deficits do NOT cause inflation Comment on Michael Lebowitz on ‘Modern Monetary Theory and its Fictional Discipline’*
It’s a Pavlovian Reflex among economists and laypersons alike: when they hear an MMTers talking about deficit-spending/money-creation, some cretin shouts Weimar or Zimbabwe. This reflex is as old as the Quantity Theory of Money.#1
The problem is, of course, that economists and laypersons alike have no idea how the monetary economy works. This is excusable for laypersons but not for economists. Fact is, in methodological terms, that economists lack the true theory. Fact is that economist do not know after 200+ years what profit is.
Because the Profit Theory is false, the whole analytical superstructure is false including, of course, Money Theory, Distribution Theory, and Employment Theory. This prevents to this day the understanding of the effects of public deficit-spending/money-creation.
The process goes schematically as follows:#2, #3
(i) The initial economic configuration is the elementary production-consumption economy. The initial state is characterized by market clearing and budget-balancing of the household sector C=Yw, i.e. the households fully spend their wage income Yw on consumption goods, and zero profit of the business sector Q=C−Yw=0.
(ii) Now, the government deficit spends. Deficit D is defined as public spending G minus taxes T, i.e. D=G−T. T is set to 0. Deficit spending on current production causes a price hike and the business sector ends up with macroeconomic profit Q=G. Note well, a one-off price hike is NOT inflation.
(iii) The business sector fully distributes profit. The distributed profit Yd goes to the Oligarchy and takes initially the form of deposits at the central bank. The CB’s balance sheet shows government overdrafts on the asset side and the Oligarchy’s deposits on the liability side. Both sides are equal to the penny. In a fiat money regime, deposits at the CB are money. Government deficit-spending increases the quantity of money.
(iv) The government consolidates overdrafts by selling interest-bearing bonds. The bonds are bought by the Oligarchy and paid for with the deposits. The CB’s balance sheet shrinks. The Oligarchy’s portfolio consists of bonds and money. In the limiting case, both overdrafts and deposits reduce to zero, that is, the quantity of money is back at its initial level.
(v) This process can be identically repeated again and again. There is no further price hike and NO inflation. What happens is that the financial wealth of the Oligarchy grows in lockstep with the public debt ($22 trillion). And this is an observable fact. All relevant economic magnitudes are measurable with the precision of two decimal places.
Dear Quantity Theory retards, get it: the lethal effect of MMT deficit-spending/money-creation policy is NOT on inflation but on distribution.
Egmont Kakarot-Handtke
* SEE IT market https://www.seeitmarket.com/modern-monetary-theory-fictional-discipline-18988/
#1 Wikipedia, Quantity theory of money https://en.wikipedia.org/wiki/Quantity_theory_of_money
#2 From MMT misunderstandings to the true Theory of Money https://axecorg.blogspot.com/2019/02/from-mmt-misunderstandings-to-true.html
#3 Deficit-spending, public debt, and macroeconomic profit/loss https://axecorg.blogspot.com/2019/01/deficit-spending-public-debt-and.html
Create ambitious government programs, when they get out of control and cause inflation, tax the private sector to shrink it, so government sector can grow more. Gee, I can't understand why MMT isn't more popular in media right now. When unemployment results, have the government automatically hire more people from good jobs to crappy government jobs doing Green New Deals,
Imagine an automatic stabilizer or some CONCRETE-non-pie-in the sky theoretical policy mechanism that could reign in or expand spending to control inflation without causing chaos and, maybe, just maybe you'll get support of moderates?
You don't need a deep understanding of sectoral balances to understand Kelton/AOC plan to convert 50% of private industry GDP to government sector (30% medical care/20% energy) as a first experiment and raise taxes if anything doesn't go according to plan.
Imagine an automatic stabilizer or some CONCRETE-non-pie-in the sky theoretical policy mechanism that could reign in or expand spending to control inflation without causing chaos and, maybe, just maybe you'll get support of moderates?
CONCRETE: Taxes are the fix for inflation, which is caused by too much money in circulation. "Moderates" are now somewhere to the right of Reagan.
Sectoral balances assume that money is a limited physical resource and as such are complexity irrelevent.
You say: “Sectoral balances assume that money is a limited physical resource and as such are complexity irrelevent.”
Sectoral balances “assume” nothing about money. Q+S=0, for instance, says that the balance of the business sector Q and the balance of the household sector S always add up to zero. This simple fact, though, is beyond the comprehension of people who call themselves economists.
You can assume that I have demonstrated the relationship between balances and money somewhere and I assume that you know how to google it.
Not an assumption, but a fact. Egmont has redefined accepted ecominc language to make nonsense that he posts on every economic blog on the web. He's a spammer and a troll, and despite having been repeatedly debunked he continues to post his garbage, 'supported' with links to his other nonsense.
That's about the hundredth critic of MMT who has got the impression that MMT claims money printing can pay for anything. So how come they've got that impression?
ReplyDeleteThe answer is that that's the impression anyone might reasonably get from reading some of Stephanie Kelton and Pavlina Tcherneva's material. Obviously if you look in the small print produced by Kelton and Tcherneva you can see that's not what they're saying. But K&T need to understand that many people just don't look at the small print.
I was predicting a year or two ago that "Kelton & Tcherneva talk" would lead to trouble. That's exactly what has happened.
What Ralph is saying is that lazy brains like Lebowitz shall continuously be fed with a silver spoon. Those who believes that should step up to the plate and start feed them.
ReplyDeleteDear idiots, government deficits do NOT cause inflation
ReplyDeleteComment on Michael Lebowitz on ‘Modern Monetary Theory and its Fictional Discipline’*
It’s a Pavlovian Reflex among economists and laypersons alike: when they hear an MMTers talking about deficit-spending/money-creation, some cretin shouts Weimar or Zimbabwe. This reflex is as old as the Quantity Theory of Money.#1
The problem is, of course, that economists and laypersons alike have no idea how the monetary economy works. This is excusable for laypersons but not for economists. Fact is, in methodological terms, that economists lack the true theory. Fact is that economist do not know after 200+ years what profit is.
Because the Profit Theory is false, the whole analytical superstructure is false including, of course, Money Theory, Distribution Theory, and Employment Theory. This prevents to this day the understanding of the effects of public deficit-spending/money-creation.
The process goes schematically as follows:#2, #3
(i) The initial economic configuration is the elementary production-consumption economy. The initial state is characterized by market clearing and budget-balancing of the household sector C=Yw, i.e. the households fully spend their wage income Yw on consumption goods, and zero profit of the business sector Q=C−Yw=0.
(ii) Now, the government deficit spends. Deficit D is defined as public spending G minus taxes T, i.e. D=G−T. T is set to 0. Deficit spending on current production causes a price hike and the business sector ends up with macroeconomic profit Q=G. Note well, a one-off price hike is NOT inflation.
(iii) The business sector fully distributes profit. The distributed profit Yd goes to the Oligarchy and takes initially the form of deposits at the central bank. The CB’s balance sheet shows government overdrafts on the asset side and the Oligarchy’s deposits on the liability side. Both sides are equal to the penny. In a fiat money regime, deposits at the CB are money. Government deficit-spending increases the quantity of money.
(iv) The government consolidates overdrafts by selling interest-bearing bonds. The bonds are bought by the Oligarchy and paid for with the deposits. The CB’s balance sheet shrinks. The Oligarchy’s portfolio consists of bonds and money. In the limiting case, both overdrafts and deposits reduce to zero, that is, the quantity of money is back at its initial level.
(v) This process can be identically repeated again and again. There is no further price hike and NO inflation. What happens is that the financial wealth of the Oligarchy grows in lockstep with the public debt ($22 trillion). And this is an observable fact. All relevant economic magnitudes are measurable with the precision of two decimal places.
Dear Quantity Theory retards, get it: the lethal effect of MMT deficit-spending/money-creation policy is NOT on inflation but on distribution.
Egmont Kakarot-Handtke
* SEE IT market
https://www.seeitmarket.com/modern-monetary-theory-fictional-discipline-18988/
#1 Wikipedia, Quantity theory of money
https://en.wikipedia.org/wiki/Quantity_theory_of_money
#2 From MMT misunderstandings to the true Theory of Money
https://axecorg.blogspot.com/2019/02/from-mmt-misunderstandings-to-true.html
#3 Deficit-spending, public debt, and macroeconomic profit/loss
https://axecorg.blogspot.com/2019/01/deficit-spending-public-debt-and.html
Create ambitious government programs, when they get out of control and cause inflation, tax the private sector to shrink it, so government sector can grow more. Gee, I can't understand why MMT isn't more popular in media right now. When unemployment results, have the government automatically hire more people from good jobs to crappy government jobs doing Green New Deals,
ReplyDeleteImagine an automatic stabilizer or some CONCRETE-non-pie-in the sky theoretical policy mechanism that could reign in or expand spending to control inflation without causing chaos and, maybe, just maybe you'll get support of moderates?
You don't need a deep understanding of sectoral balances to understand Kelton/AOC plan to convert 50% of private industry GDP to government sector (30% medical care/20% energy) as a first experiment and raise taxes if anything doesn't go according to plan.
Yeah right, private industry = all good jobs. What planet does right wing nutter live on?
ReplyDelete“When unemployment results, have the government automatically hire more people from good jobs to crappy government jobs doing Green New Deals,”
Why would the government hire from the private sectors “good jobs” when there are unemployed people?
And what of natural law says government can only create crappy jobs? There are none.
Imagine an automatic stabilizer or some CONCRETE-non-pie-in the sky theoretical policy mechanism that could reign in or expand spending to control inflation without causing chaos and, maybe, just maybe you'll get support of moderates?
ReplyDeleteCONCRETE: Taxes are the fix for inflation, which is caused by too much money in circulation. "Moderates" are now somewhere to the right of Reagan.
Sectoral balances assume that money is a limited physical resource and as such are complexity irrelevent.
Noah Way
ReplyDeleteYou say: “Sectoral balances assume that money is a limited physical resource and as such are complexity irrelevent.”
Sectoral balances “assume” nothing about money. Q+S=0, for instance, says that the balance of the business sector Q and the balance of the household sector S always add up to zero. This simple fact, though, is beyond the comprehension of people who call themselves economists.
You can assume that I have demonstrated the relationship between balances and money somewhere and I assume that you know how to google it.
Egmont Kakarot-Handtke
I assume EKH is a troll.
ReplyDeleteNot an assumption, but a fact. Egmont has redefined accepted ecominc language to make nonsense that he posts on every economic blog on the web. He's a spammer and a troll, and despite having been repeatedly debunked he continues to post his garbage, 'supported' with links to his other nonsense.
ReplyDelete