Thursday, September 12, 2019

Bill Mitchell — Germany to play smokes and mirrors again

Germany is proposing some more smokes and mirrors so that it can maintain its position as the exemplar of fiscal responsibility by obeying its ‘Debt brake’ yet inject significant deficit spending into its recessed economy, which is starved of public infrastructure spending. They are proposing to set up new institutions which will be funded by government-guaranteed debt and spend billions into the economy while ensuring these transactions do not show up on the official fiscal books of the German government. The only financial constraint these new agencies will be bound by are the European Commission’s Stability and Growth Pact rules. But because the allowable spending difference between the ‘Debt brake’ and the SGP is huge (but still well below what is needed to redress the years of austerity and infrastructure degradation) and so will provide a much-needed stimulus to the ailing German economy. Meanwhile, the Germans will tell the world how thrifty they are and how they obey their own rules. And then they can say that all other Member States should also stick to the rules. Meanwhile, the smoke and mirrors are going hammer and tong to create spending growth that bears no resemblance to the allowable growth under the Debt brake. The Debt brake then is just a sham. The upside is that needed public spending will enter the economy which tells us that the Debt brake should never have been introduced in the first place. Such is life in the EU – a daily circus.
The conservative mind equates financial debt with being guilty of moral failure, sin. In fact, in German the same term, Schuld, signifies both debt and guilt, as Michael Hudson so tirelessly points out. So this is conflation of finance and morality is a no-brainer there. 

But even in English there are two dominant translations of the Lord's Prayer, where one rendering as "forgive us our debts," and another "forgive us our trespasses." American conservatives also tend to be more religious culturally than liberals, that is, they "inherit" their world view through social reproduction of the culture by means of upbringing and association. So even when the terms are different, the conservative mind conflates them anyway.  It is backed into conservative culture and is socially "inherited" as a key fundamental of the conservative cultural world view.

In conservative minds, this manifests as a black and white world in which savers that are virtuous, with the savers supposed funding the profligate borrowers. Debts can never be cancelled other than in a way that involves punishment, bankruptcy at least, if not the poorhouse and debtors prison. 

The same applies to obligations among nations, which is a reason that the notion of imports being a real benefit when the exporter is acquiring the importer's debt is "wrong," and also held to be "dangerous" since it is believed to give the debtor power over the nation issuing the debt. In the mercantilist view, a nation's wealth is not figured in real resources but rather in financial wealth, which meant gold or silver back in the day. Now it accumulating the debt of other countries.

Deficit hysteria and debt phobia underlies the preference for fiscal austerity, which is often advertised as "expansionary fiscal austerity," a virtuous thing that stands in contrast to the "fiscal profligacy" and "fiscal irresponsibility" of the "degenerate" liberal mindset.

Because this erroneous belief about how modern money works is embedded in a strongly held moral view, explanations of how operations actually take work, together what this implies for macroeconomic and formulation of socio-economic policy, fall on deaf ears, if they are not ridiculed as "liberal" fumes of a disordered brain.

Since the "savers" are in charge politically under bourgeois liberalism, the ownership class being constituted of savers by definition, the story goes on, and on, and on.

Bill Mitchell – billy blog
Germany to play smokes and mirrors again
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

7 comments:

AXEC / E.K-H said...

Swabian housewife vs Wall Street loan shark
Comment on Bill Mitchell/Tom Hickey on ‘Germany to play smokes and mirrors again’*

The usual way to defraud people is to frame an issue emotionally and to moralize. That is exactly what Tom Hickey is doing: “The conservative mind equates financial debt with being guilty of moral failure, sin. In fact, in German the same term, Schuld, signifies both debt and guilt, as Michael Hudson so tirelessly points out. So this is conflation of finance and morality is a no-brainer there. … In conservative minds, this manifests as a black and white world in which savers that are virtuous, with the savers supposed funding the profligate borrowers.”

These conservative folks spoil the business of the progressive loan sharks and this is why they are ridiculed and smeared. For this purpose, MMTers have created the rhetorical bugaboo of the Swabian housewife. The Swabian housewife is too narrow-minded to understand that significant deficit-spending/money-creation is needed for repairing the rotten infrastructure, stimulating the ailing economy, reducing unemployment, and fighting global warming.

As the master psychologist Tom Hickey has it: “Deficit hysteria and debt phobia underlies the preference for fiscal austerity, which is often advertised as ‘expansionary fiscal austerity,’ a virtuous thing that stands in contrast to the ‘fiscal profligacy’ and ‘fiscal irresponsibility’ of the ‘degenerate’ liberal mindset.”

No, not at all, the smart Swabian housewife as well as the sagacious Hamlet#1 have learned from history the four stages of borrowing gone wrong: (i) the borrower presents himself as friedly helper in a calamity, (ii) the borrower exploits the lender via the interest rate, (iii) arrears ― successive enslavement, (iv) final expropriation.

MMTers as promoters of Wall Street’s business interests tell everybody that all these negative effects do not apply to public deficit-spending and public debt of a sovereign State. And that is right, public debt is different from private debt insofar as it is more advantageous for the lender. As a rule, for WeThePeople it is better to pay for urgent public spending immediately with taxes than to increase public debt. #2, #3, #4

Deficit-spending/money-creation benefits the Oligarchy because it increases macroeconomic profit according to the Profit Law, i.e. Public Deficit = Private Profit. MMT is a free lunch program for the Oligarchy. Financial wealth and public debt grow in lockstep and the fabulous financial wealth in the USA is roughly equal to humongous public debt. The Profit Law explains how billionaires are able to accumulate that much money and why they can buy all the bonds the Treasury issues and cash in the ultra-safe interest that is reliably taxed from WeThePeople as long as the debt is rolled over which can be very long indeed. This Ponzi scheme creates the extremely skewed distribution of income and wealth and this works as long as public debt grows.

This is the task of MMTers, to propagate the permanent growth of public debt and to play down all negative effects. What still stands in the way of the “progressive” loan sharks and the takeover of Treasury/Central Bank by Wall Street is the smart Swabian housewife.

Egmont Kakarot-Handtke

* Bill Mitchell’s blog
http://bilbo.economicoutlook.net/blog/?p=43137

#1 “Neither a borrower nor a lender be, for loan oft loses both itself and friend, and borrowing dulls the edge of husbandry.” (Shakespeare) Remember also the brouhaha about Mandeville’s The Fable of the Bees.
https://en.wikipedia.org/wiki/The_Fable_of_the_Bees

#2 How to pay for the war and to be bamboozled by economists
https://axecorg.blogspot.com/2019/05/how-to-pay-for-war-and-to-be-bamboozled.html

#3 Is MMT good for WeThePeople or for the Oligarchy?
https://axecorg.blogspot.com/2019/07/is-mmt-good-for-wethepeople-or-for.html

#4 MMT’s true program
https://axecorg.blogspot.com/2019/06/mmts-true-program.html

Matt Franko said...

You definitely have an Art Degree...

Matt Franko said...

FTR I have never read Hamlet... I have never seen a play of Hamlet... I have never seen a Hamlet movie... I have no knowledge of Hamlet whatsover and dont want any....

AXEC / E.K-H said...

Correction

... have learned from history the four stages of borrowing gone wrong: (i) the lender presents himself as a friendly helper in a calamity, (ii) the lender exploits the borrower via the interest rate, ...

Sorry
EKH

Matt Franko said...

Over here if you take a course in Finance or Accounting... if you get a question on a test to figure something out...if you instead start writing about f-ing Hamlet or some shit you will immediately fail...

S400 said...

”I have no knowledge of Hamlet whatsover and dont want any....”

Tell us something else that we didn’t already knew.

AXEC / E.K-H said...

Matt Franko

You say: “Over here if you take a course in Finance or Accounting... if you get a question on a test to figure something out...if you instead start writing about f-ing Hamlet or some shit you will immediately fail..”

I wonder why you have not figured out that MMT macro accounting is mathematically defective. The proof has been given elsewhere. If you had more than two brain cells you would have realized that the MMT balances equation (I−S)+(G−T)+(X−M)=0 lacks the balance of the business sector which accountants call profit.#1, #2

MMTers do not even get the basics of economics right and this, obviously, includes you. As Macbeth said about MMT: “… it is a tale told by an idiot, full of sound and fury, signifying nothing.”

Whatever diploma you have ― Art or Philosophy or Accounting does not matter ― it is not more worth than toilet paper.

Egmont Kakarot-Handtke

#1 Correct macroeconomic accounting gives one the Profit Law as Q=Yd+(I−S)+(G−T)+(X−M).
#2 For details of the big picture see cross-references Accounting
https://axecorg.blogspot.com/2016/12/accounting-cross-references.html