Saturday, March 20, 2021

Welcome to the age of Modern Monetary Theory: It's turning conventional economics upside down — Andew Kordik

Naturally, politicians and pundits debate whether the amount is excessive. But implicit in their seemingly routine deficit debate is a remarkable shift: Inflation has replaced debt — the old stalking horse for defeating progressive legislation — as the primary concern with deficit spending.

It's a subtle change, with profound consequences. And it augurs the rise of a revolutionary approach to political economy, Modern Monetary Theory (MMT), as the dominant paradigm in the politics of money.

Like Keynesians of yesteryear, Modern Monetary Theorists urge government to achieve full employment through fiscal policy, even when it requires deficit spending. Their comfort with large deficits emerges from an understanding that an obsession with national debt is a relic of another time, the age of gold standards and fixed currency arrangements. Today, in the age of national monetary sovereignty and free-floating currencies, countries like the United States can fulfill all financial obligations with a simple keystroke....
Salon
Welcome to the age of Modern Monetary Theory: It's turning conventional economics upside down
Andew Kordik

See also

Business and finance should be happy. Net spending accruing from fiscal deficits flows to profits.

Are these windfall profits that should be subject to taxation?


21 comments:

Peter Pan said...

Welcome to the age that wasn't.

Pollyanish.

Peter Pan said...

And I'm supposed to the one who refuses to grow up.

Ahmed Fares said...

The following article contains a nice diagram of a simple two-sector Kaleckian model.

A Simple Kaleckian Model

Matt Franko said...

I thought the deficit was savings?

Not today?

Tom Hickey said...

I thought the deficit was savings?

Deficits (flow) flow to savings (stock). Corporate profits (flow) are distributed through dividends (flow) and become savings (stock) if not spent on. The flow from deficits to savings is direct but in aggregate in that the government issues bonds that match the deficit, so the net saving occurs immediately, government securities (stock) being aggregate net financial assets (stock) of non-government.

mike norman said...

"Net spending accruing from fiscal deficits flows to profits."

Statement was worded awkwardly.

Net spending flows to corporate profits.

I (we) have been saying that here for years. The rest of the world is just figuring it out.

Even Mosler didn't get it. He's been short/bearish the stock market for 7 years.

Andrew Anderson said...

Are these windfall profits that should be subject to taxation? Tom Hickey

Haha! You support a crooked finance system and then have to tax back (uselessly if the government is monetarily sovereign) the ill-gotten gains.

Why not preclude ill-gotten gains in the first place?

Tom Hickey said...

Andrew, I have been out front criticizing extraction of economic rent.

In the first place, it is a violation of equity in that it is based on the application of asymmetric power.

Secondly, it result is system dysfunction leading to social unrest and potential political repression.

Thirdly, if a capitalist system is preferred, then economic rent undermines competition, which is foundational to capitalism.

Andrew Anderson said...

I have been out front criticizing extraction of economic rent.
Tom Hickey

Except you support MMT's Gold Standard relic banking model whereby the banks and the so-called "credit worthy", typically the richer, oppress the poorer, by one means* or another, via government privilege such as deposit guarantees and borrowings from the Central Bank.

Sure MMT proposes a permanent ZIRP but that's disingenuous since:
1) rates should be at least slightly** negative on the inherently risk-free debt of monetary sovereigns
2) because of other privileges for banks that would maintain their monopoly of the use of fiat in account form.

*e.g. automating jobs away with what is, in essence, the PUBLIC'S (including workers') credit but for private gain.

** to at least cover overhead costs, not to mention a maturity premium for shorter duration debt.

Tom Hickey said...

I have already said that I am idealist in terms of aspirations and a realist in terms of practicality. Utopianism is magical thinking without a path and feasible plan from here to there.

I have already said that in my view the present system is beyond overhaul and the entire world system needs to be revisited before humankind goes through a serious culling. I am not optimistic about this happening.

Andrew Anderson said...

and a realist in terms of practicality. Tom Hickey

A cop-out.

And besides, banks are extremely unpopular and direct fiat payments are extremely popular so it's a perfect time to transition to a system whereby citizens (at least) may use fiat directly.

Add to that the acute embarrassment that the US Federal Government CANNOT even reliably distribute fiat to its citizens (especially the unbanked).

Utopianism is magical thinking ... ibid

Straw-manning since de-privileging the banks could readily be accomplished given inexpensive fiat.

It's you who are the impractical utopian - expecting that ethics and equal protection under the law can somehow be by-passed in favor of sloppy agape.

Tom Hickey said...

Presently, humankind faces three existential threats simultaneously — nuclear war, climate change (along with the natural disasters it provokes), and pandemics.

This is where activists need to focus.

Underlying this predicament is Western liberalism as the basis for neoliberal capitalism, which entails neo-imperialism and neocolonialism.

A new world order based on a sustainable world system needs to be designed and immplemented.

What is standing in the way? Narrow self-interest.

What is the solution? Raising the level of collective consciousness, without which a solution to challenges of this scale is impossible.

The need is to design a system in which the good of the whole entails the good of individuals and vice versa.

This requires wholesale cultural and institutional change.

When I was a younger man, I was involved in the countercultural revolution of the Sixties and Seventies, after completing my tour of active duty in the US Navy. The initial intent was to change the system but it became obvious that this was beyond our ability when TPTB decided correctly that the way to address the issue was co-optation. It worked.

The diehards decided to create at alternative culture and an underground economy. That worked quite well and this resulted in cultural change but unfortunately not institutional change. That remains to be accomplished. However, along the way, the countercultural, which went mainstream, was coopted and corrupted, so there are cultural issues to deal with also.

Presently it's a mess in the US and UK. This is dangerous for the whole world.

Matt Franko said...

“ The diehards decided to create at alternative culture and an underground economy. That worked quite well”

Healthcare though... today...

Tom I know young millennials and GenZ kids who’s are making it in Art Collectives/gigs EXCEPT for healthcare...

Which is why they should have supported Trumps advanced refundable tax credits for healthcare and then they could just go do their own thing in their collectives and tell tptb to go fuck themselves...

But intead you guys were against Trump because he made mean tweets... grow the fuck up...

Matt Franko said...

“ That worked quite well and this resulted in cultural change but unfortunately not institutional change. That remains to be accomplished. ”

LOL ... no it doesn’t... no it doesn’t... where does it say that?

just get a tex credit from them for Heath care and politely tell tptb to go fuck themselves... man the fuck up...

Matt Franko said...

This is like what you’re doing with Russia ... you’re like “Russia is great!” and then meanwhile Russia would literally BLOW to get a USD... literally BLOW...

If Russia could BLOW the US for some amount of USD ... they would... they would... completely disgraced USD zombie nation ... and China would take sloppy seconds... so would Iran...

Matt Franko said...

No Iran would take sloppy thirds...

Andrew Anderson said...

Presently it's a mess in the US and UK. Tom Hickey

The root cause is twofold:
1) No limits to land ownership leading to large scale rentierism.
2) Implicit and explicit privileges for private credit creation, ie. "for the banks", leading to large scale wage and debt slavery.

Both are contrary to Bible and for that reason there's hope in countries where there are a substantial number of professed Bible believers.

Peter Pan said...

These reforms will not be implemented until it's too late.
The system will not change until it's too late.
It may already be too late.

Hello... I'm trying to be optimistic here.
Don't tell me to try harder.

Andrew Anderson said...

These reforms will not be implemented until it's too late. Peter Pan

Per the Bible, the Babylonians were literally outside the walls of Jerusalem besieging it when the Jews within decided to repent by releasing their illegally held Hebrew slaves. It worked! The Babylonians left!

But then the Jews repented of their repentance and took back(!) those they had released.

God was not impressed to say the least: Jerimiah 34:8-22

But the point is that last minute repentance does work IF IT IS SINCERE.

Peter Pan said...

Well, let us witness a sincere effort to reduce energy consumption per capita within the OECD.

Ahmed Fares said...

Christian Dutifully Prays For Her Enemies, But If God Wants To Smite Them, That’s Okay Too