Michael Hudson and Steve Keen interviewed by Steve Grumbine. Transcript of Macro and Cheese podcast, July 9 2022.
Michael Hudson — On Finance, Real Estate And The Powers Of Neoliberalism
International Trade and MMT with Keen, HudsonMichael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University
"You don’t buy imports with your own currency."
ReplyDeleteYes you do. I walked down the street and bought a VW car with £'s in my pocket. Buy loads of foreign stuff in the supermarket and use £'s.
Exporters sell their stuff in the local currency. Michael is basing his discussion around EVERYTHING is sold in $'s.
MMT recognises everything they say. A very poor debate they should have had a MMT'r on with them. Fadoul would have been the perfect MMT'r on with them.
MMT would allow you to create full employment at home and increase imports without causing substantial inflation. 2 important points come from that
1. The fact that you have created full employment. Exporters will be Qing round the block to try and steal the demand you have created. Even offer to discount their currency to do so. You can choose who to pick out of the Q and set the terms. Play them off against each other.
2. The effective demand you have created at home is not all fueled by private sector debt. The majority is created by deficit spending and not bank lending. It is more stable demand than credit book and bust.
Not only do you get the economy you want at home you get the imports you need.
By only concentrating on emerging markets and everything being sold in $'s they've missed all of that.
Bill has covered all of that here - MMT and the external sector – redux
http://bilbo.economicoutlook.net/blog/?p=40433
So there is no gotcha moment by Hudson or Keen. Just a very poor discussion.
Trying to compare MMT and the external sector – redux with being at war with Russia. Which what they are trying to do is an utterly pointless exercise comparing Apple's and oranges.
ReplyDeleteIf MMT economists were given the challenge of writing what does MMT and the external sector – redux look like it we suddenly to go to war with Russia.
Then of course it would read very differently.
A very poor effort by Mr Gumbine.
It depends on the credibility of the institutions of the nation whose currency is in question…
ReplyDeleteIf the nations institutions are highly credible then that nation can usually rely on their currency being universally accepted…
So this leaves the turd world nations out and having to borrow the forex at the IMF or World bank etc under a screw deal terms..…
Aye,
ReplyDeleteUltimately, real resource availability constrains prosperity.
http://bilbo.economicoutlook.net/blog/?p=32938
" I hope this blog has rounded off the recent discussion about balance of payments, external constraints etc.
I also hope it has clarified that a currency-issuing government can certainly use its capacities to improve the well-being of its citizens but in doing so, the nation may still remain poor, if its real resource space is limited.
A major restructuring of the multinational institutional framework, which includes scrapping the World Bank and its other neo-liberal sibling, the IMF is required to provide solutions to poverty in these cases. "
Ain't gonna happen but we've had this covered for years now. The way the discussion was framed it's as if we never even noticed it or talked about it.
Fadhel Kaboub, would have held their feet to the fire. Steve knows this stuff he has had Fedhel on his show plenty of times.
"So this leaves the turd world nations out and having to borrow the forex at the IMF or World bank etc under a screw deal terms"
ReplyDeleteThat's completely untrue.
The whole viewpoint is backwards.
The default position is that everybody buys with the currency they have and everybody sells for the currency they want to hold. The finance system then gets paid making those desires happen.
If they don't then no deal happens.
There is no need at all for smaller countries to borrow anything. The floating exchange rate will naturally find the level where the finance system can cause the funding to come about to make deals happen. Particularly as that will be driven by exporters with a surplus they need to get rid of somewhere. A new market is perfect.
What happens, as Fadhel points out, is that the new market is opened up by local oligarchs, not by democratic government. And that's where the problems start.
The discussion in this podcast is poor because it fails to address the alternative MMT viewpoint - to win at international trade you want to import as much as possible for as few exports as possible. Preferably the export that requires no labour to produce - the local currency.
https://renewablesnow.com/news/germany-to-provide-eur-26m-for-hydro-renovation-in-egypt-781639/
ReplyDelete“ An agreement has been signed between Egypt's minister of international cooperation Rania Al-Mashat and Bernd Siegfried, the head of KfW's office in Cairo.”
Egypt has to pay back in EUR…,
I have an acquaintance who was importing olive oil from Turkey and paying the Turkey entity in USD fob Baltimore then Erdogon came in and changed the rules whereby these people had to pay the Turkey bank in USD before it would be allowed to be shipped so they closed it down thinking that as soon as they paid in USD the olive oil would be stolen and they would lose all of their working capital…
ReplyDeleteErdogon USD zombie seeking USD for Turkey system IN ADVANCE probably to pay back previous Turkey USD loans…
Turkey more or less turd world nation.. .,
So now they are waiting for the Turkey policy to change or Erdogon to be gone.,,
That's a reasonable assertion of sovereignty. Letters of credit have to be posted to the satisfaction of the supplier.
ReplyDeleteOtherwise you get the Russian oligarch problem - selling oil for foreign credit and only repatriating a fraction to pay the staff.
From the Turkish point of view they don't trust the US financial system. They want the money posted in their jurisdiction under their control before they'll release the product.
The result was no deal - which is exactly the issue. A lack of trust.
Given what has happened to Russia, it's a wonder Turkey isn't demanding that Lira is posted.