The Canadian Establishment has launched a full-court press against lax fiscal policy of the Trudeau government. It would be only a slight exaggeration to say that they are calling for austerity (at least not immediately), but rumours of policies like Universal Basic Income are causing alarm bells to ring. The Canadian economic establishment is very much wedded to sound finance beliefs, courtesy of the Great Canadian Fiscal Crisis of the early 1990s.Hysteresis is a powerful influence.
As an aside, Germany still can't get over the Weimar hyperinflation and ignores the turnaround engineered by Reichsbank president Hjalmar Schacht that contributed to the economic success of the Hitler regime through "creative finance."But since the end of WWII, Germany has been firmly committed to "sound finance."
Bond Economics
Canadian Establishment: "Deficit Myths? Yes, Please!"
Brian Romanchuk
Neither "creative" nor "sound" finance are justice; hence the endless oscillation between them - endless, that is, until we destroy ourselves.
ReplyDelete“ It would be only a slight exaggeration to say that they are calling for austerity (at least not immediately), ”
ReplyDeleteBill Mitchell just advocated for post recovery austerity the other day right here:
“ “ A government should never withdraw a fiscal stimulus until the economy is recovering and non-government spending is able to take up the slack.”
They’re just saying the same thing as Bill is saying... once the economy recovers you cut back on govt spending... Deficit dove thesis...
Ofc that would immediately cause another slowdown but they are both in agreement on this...
“ A government should never withdraw a fiscal stimulus until the economy is recovering and non-government spending is able to take up the slack.”
ReplyDeleteBill Mitchell
So fiat creation for the general welfare is to have a lower priority than so-called "private" bank deposit creation for the private welfare of the banks and the rich, the most so-called "credit worthy"?!
Why not just say the MMT School are bank toadies and be done with it, Bill?
Canada isn't in dire straits as the US, so what do you expect?
ReplyDeleteZero pressure from below.
System doesn’t work that way in any case AA so don’t worry about it....
ReplyDeleteBanks don’t “create money!” ( that’s a Monetarist phrasing) they issue loans in proportion to their possessions of currency balances the government previously issued...
So banks can only do this in proportion to government spending... if government spending is reduced then lending is going to have to be reduced..,
So it’s never as bill says “non government spending is able to take up the slack!” ... non government spending is not independent of government spending... non government spending is not an independent variable.... government spending is the independent variable...
Maybe take a course in applied mathematics...
government spending is the independent variable... Franko
ReplyDeleteBaloney since the government is ALWAYS cleaning up the messes the banks make or else the country suffers a depression if it doesn't.
Maybe read some history ...
Psychologism: how morons explain the world
ReplyDeleteComment on Brian Romanchuk on ‘Canadian Establishment: "Deficit Myths? Yes, Please!"’
Brian Romanchuk explains: “The Canadian economic establishment is very much wedded to sound finance beliefs, courtesy of the Great Canadian Fiscal Crisis of the early 1990s.”
This sounds like an explanation but is pure blather. First, who is the “Canadian economic establishment” and, second, how can we know to which beliefs this fictitious subject is wedded and, third, is there any way to prove that Brian Romanchuk's statement is true?
This psychological motive-imputation is as far away from science as can be. It is, however, the stuff political propaganda is made of. Read three Trump tweets and you get the pattern.
Things are bad enough with fresh political events but they get exponentially worse with historical events.
As usual, Brian Romanchuk cannot resist jumping headfirst into the poop: “As an aside, Germany still can't get over the Weimar hyperinflation and ignores the turnaround engineered by Reichsbank president Hjalmar Schacht that contributed to the economic success of the Hitler regime through ‘creative finance’.”
Folk-psychologist Romanchuk has “Germany” on his couch and diagnoses a trauma: hyperinflation. And worse “since the end of WWII, Germany has been firmly committed to ‘sound finance’.”
OK Doctor, got it. Everybody who talks of sound finance is psychologically deranged. In particular, those people who accuse MMT of unsound economic policy. Your blather proves nothing but it is good enough for a social media trolling.
The first point to realize is: the attempt to explain things historically is bound to fail because in most cases we have no such thing as a historical fact. Everybody could know this since 1440 when Lorenzo Valla “proved that the Donation of Constantine was a forgery.”#1 This can be extrapolated backward to the folks who wrote the bible and forward to those who wrote the Warren Report which “concluded that President Kennedy was assassinated by Lee Harvey Oswald and that Oswald acted entirely alone.” (Wikipedia)
Most people are aware that most of what is called history is silly propaganda. For this reason, it is a bad idea to use historical events or mere opinions about those events in an economic argument. They prove NOTHING.
Psychoanalyzing about the collective psyche of “Germany” and inflation is a futile exercise. What we know is (i) that hyperinflation does not happen by accident but has to be engineered, (ii) that it ruined the German economy with the middle class as the primary victim. Given the historical context, the combination of Weimar/Inflation is a signifier for an unprecedented political and economic catastrophe and not for some irrational phobia.
Having enjoyed a thorough economic education “Germany” is well-prepared to smell an economic rat. MMTers understandably do not like this and call “Germany” a paranoid Swabian Hausfrau.
All this has nothing to do with economics understood as science. It is just a political shit-show. Scientifically, MMT is worthless and politically it is a fraud. Brian Romanchuk is part of it.#2
Egmont Kakarot-Handtke
#1 Wikipedia, Lorenzo Valla
https://en.wikipedia.org/wiki/Lorenzo_Valla
#2 For details see blog query
https://axecorg.blogspot.com/search?q=Brian+Romanchuk
Took history as ARTS elective ... had to... survived mostly cognitive intact ... whew ! close one!...
ReplyDeleteMy Science Degree is in a discipline using much applied mathematics...
All previous banking crisis were caused by govt regulators adding large amounts of non risk reserve assets to banks and putting them in violation of their own regulatory leverage ratio...
What you morons call the figurative “bailouts!” was govt then adding required additional equity to Depositories in order to bring them back into compliance with the regulatory ratio so they could legally function as Depositories again...
Take an accounting course...
“ and call “Germany” a paranoid Swabian Hausfrau.”
ReplyDeleteThat’s actually a pretty good one... have to admit...
Since the Supplemental Leverage Ratio was only introduced in 2010, it's hard to conceive that it's responsible for centuries of banking crisis.
ReplyDeleteWhoa, EKH - I did not discuss Germany, that was Tom Hickey. As for the definition of The Canadian Establishment, the ex-Governor of the BoC qualifies. Have a nice day!
ReplyDeleteSorry.
ReplyDeleteCorrection.
For Brian Romanchuk, one has to read correspondingly Brian Romanchuk/Tom Hickey.
“ responsible for centuries of banking crisis.”
ReplyDeletelol I’m only figuring out the problem/malfunction in the current system... ie the only one that actually matters dummie...
"Supplemental Leverage Ratio was only introduced in 2010,"
ReplyDeleteLeverage of Capital is/was always regulated ...
FDIC looks at (A-L)/D Fed looks at (A-L)/A
D is Deposit Liability, if the Fed buys assets then Deposits increase on the RHS along with Reserve Assets on the LHS...
So (A-L)/D collapses as well as (A-L)/A so who cares which one? Doesnt matter...
EITHER violation will shut the Depositories down cold...
We've always had a FDIC since 100 years ago...
https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation
" The FDIC was created by the 1933 Banking Act, "
And before that they probably just regulated the (A-L)/A at the Fed which was established in like 1913 or something...
These morons think "banks lend out the Reserves!" and are always adding Reserves to (to them) "help" the situation and they are too dumb to apply simple 8th grade algebra and see that they destroy their own Depository System when they do this..
Powell just doubled down on this SAME THING today...
Theyre incompetent...
Matt Franko: "Banks don’t “create money!” ( that’s a Monetarist phrasing) they issue loans in proportion to their possessions of currency balances the government previously issued..."
ReplyDeleteMatt, I don't really know who you are, and I have noticed you are very vocal with your opinions on this site, but you are flat wrong here. When a bank makes a loan they DEBIT the asset named LOANS and they CREDIT the liability named DEPOSITS. Look up any definition of money as M1 or M2 and you will see that loans create deposits hence create M1 or M2 hence create money.
Matt, as I said, I don't know who you are or what your qualifications are. Please tell me. I have followed MMT for the last 12 years primarily through Mitchell and Wray and Kelton. And, although a classically trained economist I now fully accept the complete MMT lens. By the way, I think I still hold the record all time high score at 99% in the accounting theory section on the CPA exam (and was the medal winner that year). And I audited banks for Ernst & Young. So I think I know something about the debits and credits of which I speak.
Global Markets Training
ReplyDeleteYou say: “When a bank makes a loan they DEBIT the asset named LOANS and they CREDIT the liability named DEPOSITS. Look up any definition of money as M1 or M2 and you will see that loans create deposits hence create M1 or M2 hence create money.”
For all practical purposes and in normal times, central bank deposits and bank deposits are functionally identical. However, in the strict sense, bank deposits are near-money, only central bank deposits/notes are money.#1 This explains the phenomenon of bank runs, i.e. when many people suddenly try to get central bank money/notes for their bank deposits.
You say: “And I audited banks for Ernst & Young. So I think I know something about the debits and credits of which I speak.”
Agreed. But despite the fact that the underlying math is the same, business accounting and macroeconomic accounting are different things. Obviously, you have not yet realized that MMT gets the macroeconomic sectoral balances equation wrong.#2 This foundational blunder makes that MMT as a whole is scientifically worthless.#3
Egmont Kakarot-Handtke
#1 The creation and value of money and near-monies
https://axecorg.blogspot.com/2017/12/the-creation-and-value-of-money-and.html
#2 “And, although a classically trained economist I now fully accept the complete MMT lens.”
#3 Wikipedia, economics, scientific knowledge, or political agenda pushing?
https://axecorg.blogspot.com/2020/06/wikipedia-economics-scientific.html
“ Look up any definition of money as M1 or M2 and you will see that loans create deposits hence create M1 or M2 hence create money.”
ReplyDeleteSo what?
“Money” is a figure of speech...
What are you going to do with those ex post accounting balances?
Here is what you are doing:
https://en.m.wikipedia.org/wiki/Reification_(fallacy)
You think they are REAL...
Why would any competent person be interested in a summation of total units of an abstraction being employed?
ReplyDeleteDo you think you can run out of them?
Egmont: “However, in the strict sense, bank deposits are near-money, only central bank deposits/notes are money.#1 “
ReplyDeleteGMT: “ definition of money as M1 or M2”
Houston, we have a problem....
You guys are trying to specifically define a figure of speech when figures of speech are intended to be non-specific ... do you realize you are doing this?
ReplyDeleteWhy would you want to do that?
Reposted from the Bond Economics site:
ReplyDeleteThe great problem is not whether the "Liberal Party" is a sound finance party or anti-MMT, but rather that much of the NDP continues to be so. IT is precisely Mulcair's and Layton's basic ignorance of public finance which undermined that party's progressiveness. The Liberals, for their part, have always been torn between the "business Liberals" who are solidly neo-Liberal, and the left Liberals, who since Pearson have sought to bring a measure of sanity to economic discourse. Trudeau, by instinct, I believe, is aligned with the latter, but many of his generational peers in the party got their start under Paul Martin and his plutocratic crowd. As long as the NDP holds the balance of power, however, because of local demands for funding, neither the Liberals nor NDP will be able to cry poor. SO the issue is what will the policy be after the next election.
Here is an oldie but goodie from Marc Lavoie:
https://www.theglobeandmail.com/report-on-business/rob-commentary/the-ndp-goes-down-the-sound-finance-rabbit-hole/article26168909/
Tom Hickey
ReplyDeleteI argued above “For this reason, it is a bad idea to use historical events or mere opinions about those events in an economic argument. They prove NOTHING.”
For those economists who do not understand how the economy works and habitually try to explain actual problems with a reference to alledged historical precedents some devastating news about history in general just comes in: Almost all you know about history is wrong.#1
How Long Was the First Millenium?
https://www.unz.com/article/how-long-was-the-first-millenium/
Egmont Kakarot-Handtke
#1 See also Links on History and Economics
https://axecorg.blogspot.com/2019/06/links-on-history-and-economics.html