Tuesday, January 31, 2023

Reuters — ECB can't go bankrupt even it suffers losses

ECB President Christine Lagarde lets the cat out of the bag.
“As the sole issuer of euro-denominated central bank money, the Eurosystem will always be able to generate additional liquidity as needed,” Lagarde said in response to a question by an Italian member of the European Parliament.

“So, by the definition, it will neither go bankrupt nor run out of money. In addition to that, any financial losses, should they occur, would not impair our ability to seek and maintain price stability....
Alan Greenspan testified to a congressional committee about the Fed's ability to do this, adding that the issue was availability of real resources rather than affordability…

Some people still don't get it. They can't get beyond the idea of money being a"thing" and can't fathom the concept of money as entries on a spreadsheet, now a digital spreadsheet and created merely by stroking a keyboard.

China bans export of core solar panel technologies — Jeff Pao

In a mirror image of what the United States has been doing with semiconductor lithography technology, China has recently amended its rules to ban the export of several core solar panel technologies in order to maintain its leading status and global market share in the sector.

A solar panel on a rooftop may include a hundred pieces of silicon and China has the lead now in machinery to manufacture those. Now Chinese manufacturers have been forbidden to use their large silicon, black silicon and cast-mono silicon technologies overseas, according to the newly-amended export guidelines published by the Ministry of Commerce and the Ministry of Science and Technology.
Asia Times
China bans export of core solar panel technologies
Jeff Pao


U.S. stops granting export licenses for China's Huawei - sources
By Karen Freifeld, Alexandra Alper and Stephen Nellis


Google translation of Telegraph post.

Dmitry Medvedev

There is no way for the courage to enemy countries to admit that their "hellish" sanctions failed with a bang. Does not work. The vast majority of industrial products and consumer goods managed to replace their, Russian, and the missing - Asian stamps. The parallel import also works, from which we receive the same Western brands, and their owners - nothing. So everything is as always: Americans earn in humiliated Europe. Crowned Europe suffers and loses money. At the same time, even the IMF predicts in Russia an economic growth this year.

It remains only to accept the rules on the use of their intellectual property. Without any licenses and paying the author's reward. This, in particular, will be our response sanctions on their property rights. For everything: from films to industrial software. By the way, thanks to those who have developed various programs for the unlimited use of their expensive intellectual products. In short, for pirate use in personal sanctions😄. And what, à la Guerre Comme à la Guerre ...

International "competition" heating up. Who started this anyway?

Russia’s “Sanction-Proof” Trade Corridor to India Frustrates the Neocons — Conor Gallagher

This is a huge deal not because of avoiding sanctions but because of its impact on world trade, the global economy, the Global South and East, and the shifting world order in the direction of multipolarism. It is also a signal that India is taking its place on the world stage as a principal player. This is a huge deal for the world system and it represents a concrete reconfiguration of this system taking place at present. 

The Global North and West will likely work at disrupting this transformation since it threatens Western dominance. Any disruption will be temporary, since the direction of development is toward that East now that the West is already developed. Subjugation of the East to the West is no longer possible in the longer run. Globalization will happen, just not linearly and not always in line with the Western agenda, especially as the level of development equalizes.

Naked Capitalism
Russia’s “Sanction-Proof” Trade Corridor to India Frustrates the Neocons
Conor Gallagher

see also

This may all be moot if Martin Armstong's algorithm is correct.
I can object all I want, but our computer will be right and we are looking at World War III between 2025 and 2027. So batten down the hatches.

Our computer, which tracks the global capital flows thanks to the cooperation with raw data, we can see that the money is still migrating out of Europe. Russians and the Chinese are pulling money out of Europe as well. So far, it is still underpinning the US marketplace.
Armstrong Economics
Europe will be Destroyed over Ukraine
Martin Armstrong

NATO’s top military spokesman called Saturday for members of the US-led military alliance to transition to a “wartime economy” in order to “increase the production in the defense industry.”

In the interview, aired Friday on Portugal’s public broadcaster RTP News, Rob Bauer, Chairman of NATO's Military Committee, said the US-led NATO alliance is prepared for a “direct clash with Russia.”

Revealing mindset. The military mind is a thing of its own. In addition, Western leaders seem to have watched Patton (the movie) too many times. 

Neither the remarks of Bauer and Nuland nor the Rand report cited above have been reported on the front pages of any major US newspapers, or cited on the evening news. While US and NATO officials are openly talking about a direct conflict with Russia and China, the public is not being notified about the extraordinarily dangerous and reckless escalation of the war that is taking place.
Top NATO spokesman calls for “wartime economy”
Andre Damon

Economic forecasting—why it matters and why it is so often wrong — Lars P. Syll

The problems that economists encounter when trying to predict the future really underline how important it is for social sciences to incorporate Keynes’s far-reaching and incisive analysis of induction and evidential weight in his seminal A Treatise on Probability (1921)....
Lars P. Syll’s Blog
Economic forecasting — why it matters and why it is so often wrong
Lars P. Syll | Professor, Malmo University

Monday, January 30, 2023

How They Paid for the War — Sam Levy

I am certainly not the first person to point to wartime mobilization as a model for our response to climate change. Alexandria Ocasio-Cortez made headlines3 for it within politics, but academics such as JW Mason, Andrew Bossie, and Isabella Weber have also worked to extract lessons from World War II for today.4 In my research I zero in on the Treasury, a key nexus of macroeconomic policymaking, and compare and contrast their view specifically with that of MMT.

The method is historical: I dug through various sources, primary and secondary, to piece together the worldview held by Treasury officials. The result is a surprisingly long list of direct quotations that you could easily mistake for having come from an MMT economist.…
Of course, the MMT economists noticed this too.

Good article based on MMT principles but which is framed to appeal to the progressives looking at a Green New Deal rather than as a tract promoting MMT.

Strange Matters
How They Paid for the War
Sam Levy, doctoral candidate in Economics at the University of Missouri - Kansas City with a co-discipline in Public Administration, and a research fellow with the Global Institute for Sustainable Prosperity. His work looks at how Modern Monetary Theory can be extended and modeled, and how the economics of wartime mobilization can inform rapid decarbonization.

Russia and Iran launch payment system as an alternative to Swift — Middle East Eye

Iran and Russia have linked their banking systems, a senior Iranian official said on Monday, a move that will allow the two heavily sanctioned countries with deepening economic ties to trade and conduct business outside the US financial system.

The two connected their interbank communication and transfer systems. Since the 2018 reimposition of sanctions, Iran has been disconnected from the western-based Swift financial messaging system, while many Russian banks were kicked off the platform following Moscow’s invasion of Ukraine.

"Iranian banks no longer need to use SWIFT ... with Russian banks, which can be for the opening of Letters of Credit and transfers or warranties," deputy governor of Iran's Central Bank, Mohsen Karimi, told the semi-official Fars news agency.…

The "National Debt" is No One's Fault — Stephanie Kelton

Let's stop the finger-pointing and have an honest conversation. Neither side is responsible for our debt crisis, because there isn't one....

 Substantial post.

The Lens
The "National Debt" is No One's Fault
Stephanie Kelton | Professor of Public Policy and Economics at Stony Brook University, formerly Democrats' chief economist on the staff of the U.S. Senate Budget Committee, and an economic adviser to the 2016 presidential campaign of Senator Bernie Sanders

Cargo cult economics — Chris Dillow

Even a little "MMT" thrown in.
Of course, a wealth tax would raise money. But the government does not need money: it can print as much of it as you want. It needs real resources: nurses, care-workers, builders, quality managers and so on.
Stumbling and Mumbling
Cargo cult economics
Chris Dillow, Investors Chronicle

The common currency for the Mercosur — Matias Vernengo

Lula's visit to Argentina, during the Community of Latin American and Caribbean States (CELAC) meeting, brought about a brief discussion of the possibility of a common currency. I have discussed here (as well as many guest bloggers) both currency unions, in particular the euro, and it's consequences. Note that the FT piece linked suggested that the common currency was the first step in a long process. I doubt it, in part because, if the end goal is a real currency union, it would be a terrible idea. The actual proposal by the current finance minister, Fernando Haddad, and one of his collaborators, Gabriel Galípolo, falls short of a common currency area. It is still a bad idea....

In my view, the point of this announcement was purely political, and to suggest that the integration between the two countries, one with a threatened economy [Argentina], the other with a threatened democracy [Brazil], is a priority. Both left of center presidents stand together.… There is no circumstance in which a movement in the direction of a common currency makes any sense. 

Naked Keynesianism — Hemlock for economics students
The common currency for the Mercosur
Matias Vernengo | Professor of Economics, Bucknell University, and formerly Senior Research Manager at the Central Bank of Argentina (BCRA) as well as an external consultant to several United Nations organizations like the Economic Commission for Latin America and the Caribbean (ECLAC), the International Labor Organization (ILO), the United Nations Conference on Trade and Development (UNCTAD) and the United Nations Development Program (UNDP)

Russia’s gas union eyes Pakistan, India — M. K. Bhadrakumar

The big growth in this century is expected to be in Asia, including Central Asia and Southeast Asia, and Africa — unless the West can either control the regions or disrupt their growth. Growth requires increased energy use and alternative energy other than nuclear is not there yet. And even with nuclear energy, much of the planet's uranium now comes from Kazakstan and Russia. Russia also constructs nuclear power plants. 

This article is mostly about natural gas along with the geopolitics and geo-economics involved.

India Punchline
Russia’s gas union eyes Pakistan, India
M. K. Bhadrakumar | retired diplomat with the Indian Foreign Service and former ambassador.

Core Inflation Woes — Brian Romanchuk

Alex Williams recently wrote “What Is ‘Core PCE Services Ex-Housing’ Anyway?,” which dissects the measure that the Fed is using to get a handle on “underlying” inflation. The most interesting bit (for me) is that about 1/4 of this measure is an imputed price index, based on wages. This means that this component will track wages (giving a convenient analytical relationship) by definition.

The logic of following this measure is that the Fed convinced itself that the core (ex-food and and energy) personal consumption expenditure is the best measure of “underlying” inflation, but it turns out that the housing part of that has construction issues (too smoothed to pick up current events), and so they wanted to strip that out of the measure.

This measure is obviously problematic. Its use reflects intellectual herding: following the methodologies of previous academics, without stopping to ask basic “why are we doing this?” questions. This is a typical feature of areas of academic failure. Since it is impossible to come up with useful results, the “publish or perish” imperative means that what gets published are marginal changes to an existing literature that has serious defects. (Source for that assertion: what I saw in my career in academia.)...
Bond Economics
Core Inflation Woes
Brian Romanchuk

Sunday, January 29, 2023

British voters depressingly caught between a rock and a hard place — Bill Mitchell

Britain is now in a very undesirable state. The governing Tories are bereft of any sensible ideas and likely to lose the next General election in 2024 to Labour, who are promising to be the party of ‘sound finance’, which means they will be incapable of dealing with the challenges that face the nation in a highly volatile world and will likely end up losing popularity and ceding government back to the Tories. And just as in 2010, the Labour reputation will tarnished and they will be lost again for another sequence of elections. That sort of future prospect is not inspiring is it. Caught between a rock and a hard place.
Bill Mitchell – billy blog
British voters depressingly caught between a rock and a hard place
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

‘Tombstone for a Tombstone’: Dealing with the ‘bad science’ behind mainstream criticism of MMT — Phil Armstrong

The problem with conventional economics is that it requires that the "settled methodology" define both the questions and how they are answered, insuring that their mathematical models will be tractable. That is inappropriate for complex adaptive systems. All life systems and especially social systems are complex adaptive systems that are appropriately modeled using organic models rather than mechanistic models suitable for the natural sciences.

While MMT does not use organic modeling based on the life sciences, neither does it use mechanistic modeling based on the assumption that economics is comparable to the natural sciences and can be modeled on similar principles. But this assume non-existent conditions such as homogeneity and ergodicity, which do not apply to social systems that are historical and influenced by culture and institutions.

Why haven't organic models replaced mechanistic models? We aren't there quite yet although much work is being done in this directions. Economics is data-based and therefore limited by path dependence and hysterisis whereas complex adaptive systems involve synergy and therefore emergence due to reflexivity.

Therefore, MMT analysis is based on ex post data from accounting on the one hand and counterfactuals with respect to future contingency. While the future cannot be predicted, it can be forecast to some degree based on the presence or absence of certain conditions that can be specified. 

But this approach does not result in models based on "settled methodology" so it is rejected by the mainstream as deviant. Krugman: "Where is your model?" The retort is, "Your modeling doesn't work and here is why. Ours does to a useful degree and therefore it should be adopted."

The Gower Initiative for Modern Money Studies
‘Tombstone for a Tombstone’: Dealing with the ‘bad science’ behind mainstream criticism of MMT
Phil Armstrong

Friday, January 27, 2023

Russia’s intentions are clarifying — Alasdair Macleod

Gold ruble in the works? Longish. Many details. Speculative so far.

Sergei Glazyev has apparently shifted from a commodity basket toward international settlement in gold with the value of gold being anchored to a barrel of oil.

Russia’s intentions are clarifying
Alasdair Macleod

Thursday, January 26, 2023

Hyman Minsky and the IS-LM obfuscation — Lars P. Syll

Setting the record straight. New Keynesianism (typified by Paul Krugman) is not Keynes, nor is it a faithful rendition of John Hicks either.

Lars P. Syll’s Blog
Hyman Minsky and the IS-LM obfuscation
Lars P. Syll | Professor, Malmo University

Can You Smell What the Year of the Rabbit Is Cooking? — Pepe Escobar

The New Silk Roads, or BRI, as well as the integration efforts of BRICS+, the SCO and the EAEU will be on the forefront of Chinese policy.
Strategic Culture Foundation (sanctioned by the US Treasury Department)
Can You Smell What the Year of the Rabbit Is Cooking?
Pepe Escobar

See also
Russian Foreign Minister Lavrov informed Africans during a press conference while on his latest tour of the continent that India is an independent multipolar powerhouse. His exact words were as follows: “Those powerhouses of their respective regions and to the large extent for the world economy as China and India – you cannot ignore them and you cannot dictate to them -- that they should develop the way that will continue to enrich the West – this is colonialism.”
Andrew Korybko's Newsletter
Lavrov Informed Africans That India Is An Independent Multipolar Powerhouse
Andrew Korybko, American geopolitical analyst and independent journalist based in Moscow, and member of the expert council for the Institute of Strategic Studies and Predictions at the People’s Friendship University of Russia



MR Online
Janine Jackson interview of  Friends of the Congo’s Maurice Carney
Originally published: FAIR (Fairness & Accuracy in Reporting) 

For US, foreign arm sales boom amid Russian invasion, Chinese intimidation — Lee Ferran

Total US arms transfers for fiscal 2022 topped $50 billion, up nearly 50 percent from prior year.

"Winning bigly." MICIMATT (Military-Industrial-Congressional-Intelligence-Media-Academia-Think-Tank complex), that is. 

Breaking Defense

Wednesday, January 25, 2023

Bill Mitchell — Bank of Japan continues to show who has the power

Its been around 9 months since the central banks of the world (bar Japan) started to push up interest rates. This reflected a return to the dominant mainstream view that fiscal policy should aim to support monetary policy in its fight against inflation and thus be biased towards surpluses, while central banks manipulated interest rates to deal with any inflationary pressures. The central banks would somehow form a ‘future-looking’ view that inflation was about to spring up and they would push rates up to curb the pressures. The corollary was that full employment would be achieved through price stability because the market would bring the unemployment rate to a level consistent with stable inflation. So full employment became defined in terms of inflation rather than sufficient jobs to meet the desires of the workforce. This is the so-called NAIRU consensus that has dominated the academy and policy makers since the 1970s. During the pandemic, it was abandoned and there was hope, particularly after statements made by the US Federal Reserve that this approach had unnecessarily resulted in elevated levels of unemployment for decades, that central bankers would target low unemployment as well as price stability. Progressive economists, of course, rejected the whole deal, noting that monetary policy shifts created uncertain distributional outcomes (creditors gain, debtors lose when rates rise) and also rising interest rates add to business costs which provoke further price rises. Anyway, after a short respite from this pernicious NAIRU logic, we are back to square one with central banks pushing up rates. The Bank of Japan is now standing, again, in the wilderness, resisting this logic and demonstrating how government should deal with the sort of pressures being felt around the globe. And who isn’t happy? The grandstanding financial markets who thought they could make a quick buck but have come up against an ideology that rejects their claim to dominance. That is a happy story....
Bill Mitchell – billy blog
Bank of Japan continues to show who has the power
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Goodbye empire? US sanctions are failing in the face of multipolarity — Felix Livshitz

Published by the Council on Foreign Relations NGO, Foreign Affairs provides space for officials within the US military industrial complex to communicate with one another on matters they believe to be of the utmost significance. Therefore, it is important to pay attention when the magazine makes major pronouncements on any issue.

It recently published an appraisal of US sanctions – the conclusion being that they are increasingly ineffective, have prompted Beijing and Moscow to create alternative global financial structures to insulate themselves and others from punitive actions, and that Washington and its acolytes will no longer be able to force countries to do their bidding, let alone destroy dissenting states, through such measures in the very near future.
RT — Question More (Russian state-sponsored media)

Tuesday, January 24, 2023

Debt, Deficits, Secular Stagnation and the Which Way Is Up Problem in Economics — Dean Baker

Dean Baker does some MMT — sort of, anyway.

Debt, Deficits, Secular Stagnation and the Which Way Is Up Problem in Economics
Dean Baker | Co-director of the Center for Economic and Policy Research in Washington, D.C

Mike’s prediction from 2016


Nothing has changed since… This current “debt ceiling!” episode could be the big one… 🤞

Migrating to Mastodon and some additional announcements — Bill Mitchell

Today, I have a few news and information items. First, I detail how to migrate to Mastodon so that you can continue to follow me as I escape Twitter. Second, I provide enrolment details for the next offering of our MMT edX MOOC. Third, I provide access details to my annual Helsinki public lecture which will take place tomorrow starting at 19:00 EAST.
Bill Mitchell – billy blog
Migrating to Mastodon and some additional announcements
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australiael

MMT And Banking — Brian Romanchuk

Since I am in the Modern Monetary Theory (MMT) camp, I cannot write a book on baking without covering some of the critiques of MMT and banking. I wrote about this topic in Section 5.7 of my earlier book, Modern Monetary Theory and the Recovery. In this section, I am give a minimal explanation of the topic, without covering too much of the same ground of that earlier text.
Note: This is a draft of a section that will go into my banking primer manuscript.
Bond Economics
MMT And Banking
Brian Romanchuk

Monday, January 23, 2023

The Most Egregious Mistake — Alastair Crooke

The situation is more complicated than this but Alastair Crooke brings out some key factors. There were actually two big mistakes that he mentions. 

First is the mistake of overestimating finance and underestimating productive capacity. Andrei Martyanov had been writing about this for some years.

The second, which is related to the first, is the abject failure of intelligence to properly access the strength of the Russian economy. This is seldom mentioned but it is a huge factor. Alastair Crooke served in British intel so it is well aware of it.

These mistakes together constitute a blunder that is leading to disaster. The US and its allies either have not yet realized this or have backed themselves into a corner from which they cannot escape without climbing down, and that threatens bringing down their house.

The analysis is sort of a combination of Michael Hudson and Andrei Martyanov without mentioning either. It's not fully MMT-compliant but the thrust of the article is not dependent on this.

Strategic Culture Foundation (sanctioned by the US Treasury Department)
The Most Egregious Mistake
Alastair Crooke | founder and director of the Conflicts Forum, and former British diplomat and senior figure in British intelligence and in European Union diplomacy

A Second Civil War — Aidan Simardone

The article is really about the economic "war" underway in the US between rural and urban areas rather than mostly political differences. So was the Civil War, which was about the abolition slavery, a political matter, but emancipation resulted in huge loss of capital. The Civil War was also about the urban-rurual divide, with the urban North dominated by factories and the rural South dominated by agriculture, chiefly cotton production.
According to Bouie, slavery’s abolition was an existential threat to White slaveowners, whereas he’s “not sure there’s anything in American society right now that plays the same role”.

Bouie is right. Ideas and beliefs are important, but without an economic basis, they cannot generate war. However, he is wrong that post-1991 polarization has no economic basis. There are real economic interests that divide Democrats and Republicans. In the 1860s it was between North and South. Today it is between rural and urban capitalists....
The analysis is interesting not so much for the conclusions as the information used to substantiate them.

Aidan Simardone

Putin urges EAEU nations to boost cooperation between national payment systems — TASS

"A consistent reduction of economic risks created by the use of foreign currencies and payment systems for mutual trade is seen as an urgent task. We believe that connecting partners to the Bank of Russia's financial messaging system and developing inter-system cooperation between national payment systems is an indispensable condition for stable settlements within the Union," he said in an address to heads of EAEU members on the occasion of Russia’s chairmanship in the integration in 2023, which was published on the Kremlin’s website on Monday.

"Harmonization of financial markets should create favorable conditions for the member states' capital to remain within the union and for it to be invested in the national economies. We also consider it advisable to examine the possibility of creating a Eurasian rating agency that would provide evaluation tools to service the growing economic activity in our macro-region," the [Putin] address reads....

Putin's speech contains more than just the payments system. 

TASS (Russian state media)

See also

Sputnik International (Russian state-sponsored media)

Rasmussen— Debt Ceiling: 56% Prefer Shutdown

As President Joe Biden prepares to face off with House Republicans over the U.S. government’s debt ceiling, a majority of voters would rather have a government shutdown than to have Congress sign off on more spending.

A new Rasmussen Reports national telephone and online survey finds that 56% of Likely U.S. Voters would rather have a partial government shutdown until Congress can agree to either cut spending or keep it the same. Just 34% would rather avoid a partial shutdown by authorizing more spending…
The rest is behind a paywall. But you get the drift.

Rasmussen Reports — Jan 23, 2023
Debt Ceiling: 56% Prefer Shutdown

Why sanctions may backfire — Heribert Dieter

The title should be, Why sanctions are backfiring. The hypotheticals are present realities.

Interestingly, many have observed that when sanctions were used, war not long behind but they also perfunctorily say that this situation is likely different. Really? War is already raging and escalating along with increased sanctions that are having no noticeable effect on Russia' behavior.

This is a policy mistake that is turning into a strategic blunder of major proportions. Iraq was a strategic blunder but proportionately insignificant in comparison with Russia and China, who have been driven together into a de facto alliance against the US and its allies, many of whom have been dragged into this unfolding conflict reluctantly. War is returning to Europe, the very thing that NATO, the Common Market,  the European Union and the Eurozone were meant to obviate.

Progress in Political Economy (PPE) 
Why sanctions may backfire
Heribert Dieter | Senior Fellow at the German Institute for International and Security Affairs, Berlin, Germany. He is also an Associate Fellow at the Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick, UK

See also
Less than 9 percent of about 1,400 EU and G7 companies that had subsidiaries in Russia before Moscow invaded Ukraine had divested at least one subsidiary in the country by November 2022, according to data obtained by professor Simon Evenett, from the University of St. Gallen, and and professor Niccolò Pisani, from the International Institute for Management Development. This is despite the harshest ever Western sanctions against Moscow and the media reports of multiple companies’ exits from the country since the start of the Ukraine war.

"These findings call into question the willingness of Western firms to decouple from economies their governments now deem to be geopolitical rivals," the study's authors say in a statement.…

This may have something to do with the US exempting itself from sanctions when convenient. 

Politico (German-owned)
Majority of Western companies doing business as usual in Russia, study finds

Exaggerating China’s military spending, St. Louis Fed breaks all statistical rules with misleading graph — Ben Norton

The Federal Reserve Bank of St. Louis published a jaw-droppingly misleading graph that portrays China as spending more on its military than the US. In reality, the Pentagon’s budget is roughly three times larger....

When the St. Louis Fed published the deceptive graph on Twitter, it went viral, garnering hundreds of negative responses.

Michael P. McDonald, a professor of political science at the University of Florida, quipped, “If they’re willing to put this out, just imagine the internal analyses the Fed conducts to manage the economy”.

In an accompanying report, the St. Louis Fed admitted that China’s 2021 defense spending was just 1.7% of GDP, “which was the lowest share among the six nations in the figure…

How to Lie with Statistics by Darrell Huff was required reading in my stat course in college. That was in 1958. It is still  65 years ago. Huff was not a statistician himself but a journalist and he explained how statistics could be used to misrepresent. 

There is a big difference between a federal reserve bank doing this and news media. News media can plead journalistic mistake; a federal reserve bank can't. In fact, a mistake would be more worrisome than an intentional attempt to misrepresent, as Professor McDonald (above) implies.

But they make it clear in the article that China's spending is much less than the US. Doesn't that clear them? Compare this to a misleading headline and a correction contained deep in the article. This is actually standard practice in propaganda.

Geopolitical Economy
Exaggerating China’s military spending, St. Louis Fed breaks all statistical rules with misleading graph
Ben Norton

Not directly related, but peripherally. See also for a humor bonus.

Global South In collaboration with Godfree Roberts — Here comes China

 In collaboration with Godfree Roberts and his excellent Here Comes China weekly newsletter.  This selection is but a fraction of what is a rich, complete and interesting newsletter.

Mostly finance and economics.

Global South
Here comes China

Sunday, January 22, 2023

Rocky defaults


Second greatest scene in motion picture history… up at 4am to train and fails:

We need to default…

Yet here he is a month later:

We need to default you pussies…

Bill Mitchell – Military spending binge is working to keep economies growing

Its been around 9 months since the central banks of the world (bar Japan) started to push up interest rates. And still there are no firms signs that a recession is impending. There are some signs of a growth slowdown but that is not uniform across the globe. The US seems to be continuing to grow. While that suggests that monetary policy is less effective than the mainstream economists claim – which is no surprise to non-mainstream economists who have long understood that fiscal policy is the tool of choice for counter-stabilisation, there are other offsetting factors that are at play here. Governments around the world have seriously ramped up their fiscal outlays over 2022 on military procurements as the perceived threat from Russia and China has been magnified by military generals and their mates in the big US weapons corporations, who have taken the opportunity to get make massive extra profits. The power of the military-industrial complex (MIC) is long-standing and well understood. It explains why all the usual disaster scenarios that accompany increasing fiscal outlays by governments haven’t attracted much criticism. Too many elites benefit from the military binge. But the fiscal expenditure also helps to counteract any spending contraction by households who are negatively impacted by interest rate increases.…

PS: I am migrating away from Twitter to Mastodon. I will write a little primer soon on how you can all do the same. I want as many people who follow me on Twitter (currently 20.5 thousand odd) to make the transition too. I will provide instructions tomorrow on how to do that. 

Bill Mitchell – billy blog
Military spending binge is working to keep economies growing
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

“SpaceX Falcon Heavy landing explosion forces Elon Musk into humiliating explanation“


Look how these Art degree morons describe the result of this rocket test by Musk… “humiliating explanation!”…


Here’s musk:

 "The South African entrepreneur posted: “High entry force & heat breached engine bay & centre engine TVC failed.”  

No biggie… make some adjustments…

That was a few years ago now today:

These Art degree people are disgraced dummies…  a humiliation of humanity…

We need to default…

These Are the Times that Try Men's Soul's. And mine too. — Stephanie Kelton

Stephanie Kelton traces the problem to misunderstandings resulting from a poor choice of terms in which to talk about government finance, modeling it conceptually on household and firms finance, even when the former is the monopoly issuer of its currency and all that implies financially and economically, whereas firms and households are users of the currency that must obtain the currency, e.g, to pay taxes, since the government is the sole supplier. Consequently, it's a mess that those in a position to profit from can exploit. She suggests adopting a terminology that fits operational realities based on existing institutional arrangements instead of continuing to use terms that promote a fantasy.

The Lens
These Are the Times that Try Men's Soul's. And mine too.
Stephanie Kelton | Professor of Public Policy and Economics at Stony Brook University, formerly Democrats' chief economist on the staff of the U.S. Senate Budget Committee, and an economic adviser to the 2016 presidential campaign of Senator Bernie Sanders

Brazil and Argentina preparing new Latin American currency to ‘reduce reliance on US dollar’ — Ben Norton

Brazil and Argentina are making plans for a Latin American currency called the Sur, to “boost regional trade and reduce reliance on the US dollar”. Lula had pledged it while running for president.
Geopolitical Economy
Brazil and Argentina preparing new Latin American currency to ‘reduce reliance on US dollar’
Ben Norton

Gower Initiative — Modern Monetary Theory: Key Insights, Leading Thinkers (new book)

A new book from Edward Elgar Publishing in association with GIMMS
Description of the chapters and their authors.

The Gower Initiative for Modern Money Studies
Modern Monetary Theory: Key Insights, Leading Thinkers

Saturday, January 21, 2023

The Debt Ceiling Limit is Destructive, Duplicative, and Dumb — Stephanie Kelton

When the limit is reached, it forces Congress to reaffirm its willingness to spend what it is already legally obligated to spend.

In my view (I am not a constitutional lawyer), the president should just ignore the debt ceiling as contradictory. Now, the president is assuming that one horn of the dilemma prevails when there is no logical reason for doing so. A constitutional argument can be made that the debt ceiling is in violation of the Constitution, specifically the Fourteenth Amendment, Section Four, and therefore, it doesn't stand. 

The Lens
The Debt Ceiling Limit is Destructive, Duplicative, and Dumb
Stephanie Kelton | Professor of Public Policy and Economics at Stony Brook University, formerly Democrats' chief economist on the staff of the U.S. Senate Budget Committee, and an economic adviser to the 2016 presidential campaign of Senator Bernie Sanders

Zero Hedge — India Overtakes China As World's Most Populous Nation

Mixed blessing, especially with the level of disorganization and divisiveness in India. 

Demographics leads to opportunities and challenges and population increase can increase growth but it can also present emergent challenges that are difficult to meet without high-level organization, which India has not demonstrated so far.

In contrast, China recognized its demographic challenges decades ago, which was the purpose of the one-child policy. Now China growth has stabilized and even begun to shrink. While this is positive overall, it also presents challenges such as an aging population for a while. But China's major issue at the time of the institution of the policy was not being able to feed its growing population. That spelt political trouble down the line so the government acted to preempt it. China also instituted a development program that has paid off.

Zero Hedge
India Overtakes China As World's Most Populous Nation
Tyler Durden

Extending Capital to Nature, Reducing Nature to Capital— Peter Dorman

Capitalizing the commons. Peter Dorman explains why this should not be done.

Basically, actual value lies real resources ("stuff"), not in nominal terms ("money"). For example, this is suggested by the distinction between nominal (market price) and real (inflation-adjusted price). The value of stuff is based on availability and utility. The most "valuable" real resources are are vital resources. On this scale, air and water are the most valuable, although owing to their availability, they are considered free goods.

The Biden administration has announced it is inaugurating a program to incorporate the value of natural resources and ecological services into national income accounts. The New York Times article reporting this development predictably portrays the response as divided between two camps: on the one side are environmentalists, who think this will lead to more informed decision-making, and on the other Republicans and business interests who fear it is just a stalking horse for more regulation.

For the record, here is one environmentalist (me) who thinks it’s a bad idea—not completely, but mostly....
Are the quality of our environment and the availability of natural resources crucial to our well-being? Certainly. Can these effects be captured by economic measurement? Mostly no. The monetary economy is, almost by definition, the realm of the fungible. Money is what allows us to have more of one thing at the cost of less of another, and then to change our minds and switch back to what we had before. Pizzas can be bought and sold for money. School buildings can built for money. So as a society we face a choice between different consumption categories, one that is reversible if attitudes shift.

What is fundamental about most natural resources is that they are not fungible....
Extending Capital to Nature, Reducing Nature to Capital
Peter Dorman | Professor of Political Economy, The Evergreen State College

“Golden ruble 3.0” –How Russia can change the infrastructure of foreign trade — Sergey Glazyev and Dmitry Mityaev

Trade is settled either by barter, including using commodities, mostly precious metals historically, or a "safe currency" that countries are willing to hold. The USD, GBP, and EUR are considered safe currencies. Thus, an issue arises with "de-dollarization," which includes all currencies that Western powers control the use of. These currencies are considered "safe," that is, are not only default free but also relatively stable, but being subject to Western control, they put users at a disadvantage in that they can be "weaponized." So the question arises, how to settle trade without using currency or settlement systems of "unfriendly" states.

One solution is two-party trade settled either by exchange of commodities that the respective partners to the trade desire, or by using their own currencies. Both alternatives are coming to be used now. 

However, a more efficient system would be to replace unwanted currencies even through they are considered "safe" for states friendly to their issuers, at least as long as relations remain friendly, with another currency that the respective painters to trade would desire to save for use in future trade with another party. Sergey Glayev has been working on a commodity-linked solution, which is presented here.

This is not only a plan but also a review of the relevant history. This particular proposal is not as important as the perceived need to replace the dollar system that is no dominant and that the US has "weaponized" using both primary and secondary sanctions as means of prosecuting economic warfare. Is the term "warfare" too strong? It seems not, since the West, and chiefly the US, aimed at bringing down the Russian government using sanctions and replacing it with a Yeltsin-like government that would be effectively a US puppet.

Of course, criticism of a new gold standard — Glazyev advocates fixing oil price to a specific amount of gold instead if letting it float — would be that metal standards have resulted in mercantilism historically, with all that implies for global economics, geopolitics, and the world system.

MR Online
“Golden ruble 3.0” – How Russia can change the infrastructure of foreign trade
Sergey Glazyev, Academician of the Russian Academy of Sciences and Dmitry Mityaev, Executive Secretary of the Scientific and Technical Council under the Chairman of the EEC Board
Originally published at Russia Posts English, December 26, 2022

See also

Zero Hedge
UAE De-Dollarization Accelerates: "Crypto Will Play A Major Role In Trade Going Forward"
Tyler Durden

The Fed's Sole Mandate — Lev Menand

 This is an important post by a law professor. Hat tip to Adam Tooze for pointing me toward it. Here is a key excerpt. According to Professor Menand, the Fed's sole mandate is promoting full capacity utilization and not chiefly managing inflation or running a command economy based on monetary policy decisions. The Fed has only a contributory role. Presently, it is widely assumed that the Fed has a mandate to manage the economy using monetary policy either as a replacement to fiscal policy or as a counter to it using the central bank "reaction function."

Here is a key excerpt:

In 1977, Congress added Section 2A to the Federal Reserve Act, charging the Fed with “maintain[ing the] long run growth of the monetary and credit aggregates commensurate with the economy’s long-run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” Note that, in this instruction, maximum employment and stable prices—the two functions that commentators tend to highlight today—are included as among the macroeconomic consequences of full capacity utilization, rather than as competing desiderata that the Fed is supposed to trade off. The animating idea is that when the economy is growing at its fullest potential, everyone who is able to produce goods and services will have a job, prices will be stable, and the cost of borrowing money for further investment will be moderate. Bringing about these macroeconomic conditions is not a direct goal for the Fed; rather, the Fed’s mission is to administer the banking system in a way that grows the money supply at a rate that is consistent with achieving them over the long term.

The legislators and Fed officials at the time understood Section 2A to be merely reiterating the Employment Act and incorporating it expressly into the Fed’s own organic statute. As the Fed’s Chairman, Arthur Burns, put it, the text, initially included in a 1975 resolution, “adds nothing new to the objectives of Federal Reserve policy as already defined by statute [in the Employment Act]”). The Fed’s job, as policymakers then recognized, was not to combat inflation—it was to ensure that banks create enough money and credit to keep the nation’s productive resources fully utilized, which meant pursuing maximum employment. Congress, in other words, designed the Fed to keep the economy growing, not slow it down for the sake of stable prices in the short-to-medium term.

This distinction is important because there are many reasons that, in the short-to-medium term, the economy might not achieve full potential—as manifested by maximum employment, price stability, and moderate long-term interest rates. And often these reasons have nothing to do with monetary expansion, the only variable Congress expected the Fed to control. For example, supply shortages of key goods and services can cause prices to rise for months or even years while producers adapt to satisfy changing market demand. The Fed’s job is not to stop these price rises—even if policymakers might think stopping them is desirable—just as the Fed’s job is not to engineer long-term interest rates so that they are “moderate” or to lend lots of money to companies so that they can hire more workers. The Fed’s job is to ensure that a lack of money and credit created by the banking system—an inelastic money supply—does not prevent the economy from achieving these goals. That is its sole mandate.

Professor Menand is not saying that this is a desirable way to proceed, or simply advise. He is claiming it is integral the the institutional arrangements by which the legislature has delegated certain powers and responsibilities to the Fed regarding monetary policy and US central bank operations.

Where did things go wrong? In the adoption of Milton Friedman's monetarism along with subsequent iterations, from which the Fed and a large swath of the intelligentsia have so far not recovered.

But what about increasing interest rates adding to fiscal flows, hence, acting as a stimulus, which this policy does. Professor Menard points out that the purpose of increasing interest rates is to cool the economy by making the cost of borrowing more expensive, hence reducing investment by lowering profitability. While increasing rate does increase Fed interest payments on reserves does act as a stimulus as a fiscal add, this increase in the interest rate is also a price rise and adds to inflation, the opposite of what the Fed intends. Simultaneously, it also reduces investment by adversely affecting profitability, which eventually reduces supply and increases prices even more, while lowering output and increasing unemployment.

Why would the Fed do this? The reasoning is simple. It is assumed that inflation is due to wage pressure, hence increasing interest rates will lower profitability leading to reduced employment which increases competition for existing jobs, lowering wage pressure.

This is a two-variable approach (Philips curve) to a more complicated issue in that there may be more variables involved, and, in fact, the problem may not be related to wage pressure, as is assumed, but rather, be based on supply contraction.

Professor Menand doesn't go deeply into these economic issues and the relationship of economics and finance, but only points to them. MMT economists do examine them in detail.

The importance of this article lies in showing how the MMT position on institutional arrangements is correct from a legal and regulatory perspective.

I should also mention in this regard that law professor Rohan Grey has also been ably presenting the MMT case from the legal perspective.

LPE Project
The Fed's Sole Mandate
Lev Menand | Associate Professor of Law at Columbia Law School and author of

13 Firms Hoard $1 Trillion In Cash


This was a year ago probably have even more now… Soon to be generating an additional $60B annual risk free munnie for doing nothing… 🤑

Trump v Biden


Trump: “DON’T CUT Social Security/Medicare”

Biden: “Put all of it on the table”

Friday, January 20, 2023

Dems crack

According to McCarthy here the Biden people cracked:

We’ll see…. 

The Return Of The Debt Ceiling (Again) — Brian Romanchuk

The debt ceiling is being used a negotiating tool in American politics yet again. My concern with American politics is that most things seem to be over-dramatised, while some disturbing things are shoved under the carpet. The debt ceiling is a great source of hysterics from south of the border. My highly non-informed take is that this debt ceiling drama will end in the usual way, going to the 11th hour before some kind of deal is struck.

American politics is kabuki. Externally, the drama is veneer over the bipartisan money/power grab. Internally, the only matter in contention is how the loot is divided. Behind the scenes it runs on legalized corruption and burying the bodies.

However, there is some genuine drama going on now. Both parties are trying to destroy the other in a zero-sum game in which the winner takes all. 

Bond Economics
The Return Of The Debt Ceiling (Again)
Brian Romanchuk

Another analogy


MTG with the “checkbook!" analogy:

Ultra MAGA digging in for a slog…



It’s the good oooolld “govt as business!” art degree analogy by this person who I guarantee does not even know what Basis of Accounting the US govt uses…. GUARANTEED… lock it…

Thursday, January 19, 2023

Global South: Gold-backed currencies to replace the US dollar — Pepe Escobar

 Glazyev and Poszar.

The Cradle
Global South: Gold-backed currencies to replace the US dollar
Pepe Escobar


Geopolitical Economy Report
Peru’s natural resources: CIA-linked US ambassador meets with mining and energy ministers to talk ‘investments’
Ben Norton

India aims to become key semiconductor supplier for world — [Communications Minister Ashwini] Vaishnaw

"Our university system that produces a large number of talent is also helping a lot as we have tied up with many universities to prepare right talent," he said.

Asked about the government's own investment plans, he said the government itself is putting in USD 10 billion and it has chalked out a long haul programme....
Business Standard (India)

Wednesday, January 18, 2023

Zero Hedge — Poszar Was Right: Saudis Confirm Non-Dollar Oil Trade Plans In Davos

Earlier this month, former NY Fed repo guru Zoltan Pozsar wrote one of his most important reports of 2022, in which he described how Putin could unleash hell on the Western financial system by demanding that instead of dollars, Russian oil exporters are paid in gold, effectively pegging oil to gold and launching Petrogold.
Then, China's President Xi visit with Saudi and GCC leaders marked the birth of the petroyuan and a leap in China’s growing encumbrance of OPEC+’s oil and gas reserves: that's because with the China-GCC Summit, "China can now claim to have built a 'special relationship' not only with the '+' sign in OPEC+ (Russia), but with Iran and all of OPEC+."
And now, according to Bloomberg, Saudi Arabia is open to discussions about trade in currencies other than the US dollar, according to the kingdom’s finance minister….
End of an era?

Also at ZH
According to the Russian news agency Vedomosti, Iran is working with Russia to create a “token of the Persian Gulf region” that would serve as a payment method in foreign trade.
Back to international trade settled in gold without having to deliver gold other than on demand. Prior to 1971, international trade was settled in physical gold bars daily in the vault under the FRBNY. (I witnessed this taking place in 1963.)

Iran And Russia Want To Issue Stablecoin Backed By Gold; Report
Helen Partz via CoinTelegraph.com


IEA Sees Global Oil Demand Hitting A Record High In 2023
Tsvetana Paraskov

TASS (Russian state media)
Russia to build new forms of interaction free of West’s influence, says top diplomat

RT — Question More (Russian state-sponsored media)
US anti-Russia bill ‘totally unwarranted’ – South African FM

China’s economy is on a rebound — M. K. Bhadrakumar

From an Indian perspective, it may seem momentarily that China’s economy is slowing while India’s expanded by nearly 7 percent (per World Bank predictions.) Can India catch up with China in a medium term scenario?

This is where the devil lies in the fine print. The heart of the matter is that China’s GDP growth of 3 percent translates as a year-on-year expansion of its economy by a whopping $18 trillion.

To put matters in perspective, China has added a little over five and a half times the size of India’s economy (GDP: $3.5 trillion) in a single year.…

Clearly, with global economic growth likely to decline sharply and global inflation still hovering at high levels in 2023, the economies of major developed economies are likely to show stagflation. Suffice it to say that the European countries will be inclined to view the Chinese market as holding the key to an early economic recovery. Recasting the global supply chains by decoupling from China is going to be easier said than done.

the US simply cannot compete with China anymore as a manufacturing country. In infrastructure, the gap is so patently wide. Ukraine has shown that the US lacks the capability to fight Russia and needs a coalition. It is no different when it comes to China.

Surely, the economic data on the Chinese economy will be taken very seriously in Washington....
India Punchline
China’s economy is on a rebound
MK. Bhadrakumar | retired diplomat with the Indian Foreign Service and former ambassador.

See also

Western-centric, like everything at Oilprice. Haley Zaremba fails to notice that Russia and China are stepping in as leaders of the Global South and East and taking charge of development there.

The Global Energy Crisis Is Redrawing Geopolitical Maps
Haley Zaremba

See also

Still trying. And Russia hasn't pulled the plug yet. The EU is acting as if Russia doesn’t have escalation dominance through control of economically vital resources.


Confiscation of property. The end of economic liberalism based on the sanctity of private property.

Why the West’s new anti-Russia sanctions are a total game changer

Bill Mitchell – EU bonds will not become a ‘safe asset’ – Germany and Co won’t let that happen

It’s Wednesday and I have several items to discuss or provide information about today. Today, I discuss the future of the EU-bonds that were issued as part of two main emergency interventions in 2020 as policy makers feared the worse from the pandemic. The question is whether these assets can ever become ‘safe’ in the same way that Japanese government bonds or US treasury bonds are clearly ‘safe’. The answer is that they cannot and the reason goes to the heart of the problem besetting Europe – the fundamental monetary architecture is flawed in the most elemental way. I also provide some updates for MMTed and a great new book. And, of course, this week, I have to remember Jeff Beck in the music segment....
Bill Mitchell – billy blog
EU bonds will not become a ‘safe asset’ – Germany and Co won’t let that happen
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Old Heterodox Banking Debates — Brian Romanchuk

Banking and money is an area of ancient debates between post-Keynesians (and their fore-runners) and mainstream economists. Many of these showed up in my earlier book Abolish Money (From Economics)!, with the theme more focussed on money. Although I believe I need to touch on this topic, I want to keep it short. Partly because it appeared in another book, and partly because I am less and less convinced that these debates are that useful for discussing banking.

Note: Once again, this is a draft of a manuscript section from my banking book. It will be in a chapter on modelling banking.

Excellent summary of "exogenous" and "endogenous" as applied to "money." This is important for understanding the relationship of finance and economics, and it underlies a good part of MMT, The descriptive aspect of which involves modeling this relationship conceptually. That is to say, MMT as a theory provides an explanation of the relationship of finance and economics in terms of institutional arrangements. One could say that the mathematical aspect of the modeling  involved is provided by the accounting.

With these old debates somewhat covered, I will then discuss some of the “banking controversies” associated with Modern Monetary Theory.

Stay tuned.

Bond Economics

Debt doomsday skepticism

At least some others are exhibiting some skepticism… 

If you like some alternative to regime content Beattie is a good follow… 

Tuesday, January 17, 2023

House Speaker on Debt Ceiling


How the Davos elite took back control — Thomas Fazi

 Given the almost cartoonishly elitist nature of this jamboree, it seems only natural that the organisation has become the subject of all sorts of conspiracy theories regarding its supposed malicious intent and secret agendas connected to the notion of the “Great Reset”. In truth, there is nothing conspiratorial about the WEF, to the extent that conspiracies imply secrecy. On the contrary, the WEF — unlike, say, the Bilderberg — is very open about its agenda: you can even follow the live-streamed sessions online.

Founded in 1971 by [Klaus] Schwab himself, the WEF is “committed to improving the state of the world through public-private cooperation”, also known as multistakeholder governance. The idea is that global decision-making should not be left to governments and nation-states — as in the post-war multilateralist framework enshrined in the United Nations — but should involve a whole range of non-government stakeholders: civil society bodies, academic experts, media personalities and, most important, multinational corporations. In its own words, the WEF’s project is “to redefine the international system as constituting a wider, multifaceted system of global cooperation in which intergovernmental legal frameworks and institutions are embedded as a core, but not the sole and sometimes not the most crucial, component”.

While this may sound fairly benign, it neatly encapsulates the basic philosophy of globalism: insulating policy from democracy by transferring the decision-making process from the national and international level, where citizens theoretically are able to exercise some degree of influence over policy, to the supranational level, by placing a self-selected group of unelected, unaccountable “stakeholders” — mainly corporations — in charge of global decisions concerning everything from energy and food production to the media and public health. 

How the Davos elite took back control
Thomas Fazi, co-author with William F. ("Bill") Mitchell of Taking Back the State

Monday, January 16, 2023

World’s richest 1% captured over 63% of all wealth created since 2020 — Oxfam

The world’s richest 1% captured over two-third of all wealth created by humanity since 2020, leaving just one-third for the other 99% of the population, claims a report published by Oxfam on Monday, January 16.

The report, titled ‘Survival of the Richest,’ notes that the richest 1% of the world’s population captured over USD 26 trillion (nearly 63%) of the USD 42 trillion created since 2020, nearly twice the USD 16 trillion (37%) that went to the rest of the population.

Oxfam notes that the rate of the concentration of wealth has been faster in the first two years of the new decade than ever before. In the previous decade the super-rich had expropriated nearly 54% of the total wealth created.
"Capital accumulation."

People's Dispatch

The origins of the ‘household analogy’ — Richard Murphy

Housewives and Downing Street by Joanna Bright (1935).

Tax Research UK
The origins of the ‘household analogy’
Richard Murphy | Professor of Practice in International Political Economy at City University, London; Director of Tax Research UK; non-executive director of Cambridge Econometrics, and a member of the Progressive Economy Forum

Bill Mitchell – The Eurozone fictions continue to propagate

There was a Financial Times article recently (January 8, 2023) – Monetary independence is overrated, and the euro is riding high – from Martin Sandbu which strained credibility and continues the long tradition of pro-Euro economists attempting to defend the indefensible – fixed exchange rate, common currency regimes. He claims that the Euro is a better system in the modern era for dealing with calamity than currency independence. However, as I explain below, none of his arguments provide the case for the superiority of the Eurozone against currency-issuing independence. Currency-issuing government can certainly introduce poor policy – often because the policy makers refuse to acknowledge their own capacity and think they have to act as if the nation doesn’t have its own currency. But the negative consequences that flow from testify to the poor quality of the polity rather than any disadvantages of the currency independence. The Euro Member States are being bailed out by the central bank and if that stopped the system would demonstrate the inherent dysfunction of its monetary architecture and nations would fail....
Bill Mitchell – billy blog
The Eurozone fictions continue to propagate
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Sunday, January 15, 2023

Trump on debt ceiling


Trump still telling GOP to negotiate hard using threat of zero increase of debt ceiling…

Ceiling to be reached this week after Thursdays auctions:

Ultra MAGA budget fix


Liberal Art Bannon (Georgetown/Harvard) and Liberal Art Brat (Princeton/American U) with MAGA’s antithesis to MMT:

Typical Platonist circle jerk…

Saturday, January 14, 2023

Capitalism and extreme poverty: A global analysis of real wages, human height, and mortality since the long 16th century — Dylan Sullivan and Jason Hickel


This paper assesses claims that, prior to the 19th century, around 90% of the human population lived in extreme poverty (defined as the inability to access essential goods), and that global human welfare only began to improve with the rise of capitalism. These claims rely on national accounts and PPP exchange rates that do not adequately capture changes in people’s access to essential goods. We assess this narra- tive against extant data on three empirical indicators of human welfare: real wages (with respect to a subsistence basket), human height, and mortality. We ask whether these indicators improved or deteri- orated with the rise of capitalism in five world regions - Europe, Latin America, sub-Saharan Africa, South Asia and China – using the chronology put forward by world-systems theorists. The evidence we review here points to three conclusions. (1) It is unlikely that 90% of the human population lived in extreme poverty prior to the 19th century. Historically, unskilled urban labourers in all regions tended to have wages high enough to support a family of four above the poverty line by working 250 days or 12 months a year, except during periods of severe social dislocation, such as famines, wars, and institutionalized dispossession – particularly under colonialism. (2) The rise of capitalism caused a dramatic deterioration of human welfare. In all regions studied here, incorporation into the capitalist world-system was associated with a decline in wages to below subsistence, a deterioration in human stature, and an upturn in premature mortality. In parts of South Asia, sub-Saharan Africa, and Latin America, key welfare metrics have still not recovered. (3) Where progress has occurred, significant improvements in human welfare began several centuries after the rise of capitalism. In the core regions of Northwest Europe, progress began in the 1880s, while in the periphery and semi-periphery it began in the mid-20th century, a period characterized by the rise of anti-colonial and socialist political movements that redistributed incomes and established public provisioning systems.
World Development 161 (2023) 106026
Capitalism and extreme poverty: A global analysis of real wages, human height, and mortality since the long 16th century
Dylan Sullivan. Macquarie School of Social Sciences, Macquarie University, Australia; and Jason Hickel, Institute for Environmental Science and Technology (ICTA-UAB), Autonomous University of Barcelona, Spain, and International Inequalities Institute, London School of Economics and Political Science, UK

(This article is tagged as "World-systems theory" at Science Direct.)

See also

Following the colonial example, Hitler aimed to colonize Russia, tried it, and failed. This objective continues today. The Western goal to "decolonize" Russia means to break Russia into smaller states that can be controlled in order to control Russian resources thereby. The Russian leadership is quite aware of this.

Geopolitical Economy
British empire killed 165 million Indians in 40 years: How colonialism inspired fascism
Ben Norton


Unfortunately, Emmanuel Todd's article is paywalled, but some that have access are writing about it.

Moon of Alabama
Emmanuel Todd On The Third World War

Geopolitical Economics
‘World War 3 has already started’ between US and Russia/China, argues French scholar
Ben Norton

Voltaire Network
The world order already changed in 2022
Thierry Meyssan


China replacing Western influence in the ME?

Global South
Godfree Roberts from the Here Comes China newsletter. Hope for Palestine and Iran?

Friday, January 13, 2023

Economists Radhika Desai & Michael Hudson explain multipolarity, decline of US hegemony — Geopolitical Economy Hour

Video and transcript.
Economists Radhika Desai and Michael Hudson introduce their show Geopolitical Economy Hour discussing the rise of the multipolar world and decline of US hegemony.
Geopolitical Economy
Geopolitical Economy Hour
Economists Radhika Desai & Michael Hudson explain multipolarity, decline of US hegemony

What Every American Needs to Know About the Congressional "Pay-For" Game (Part 2) — Stephanie Kelton

You know the drill.It was just explained in a previous post here.

The Lens
What Every American Needs to Know About the Congressional "Pay-For" Game (Part 2)
Stephanie Kelton | Professor of Public Policy and Economics at Stony Brook University, formerly Democrats' chief economist on the staff of the U.S. Senate Budget Committee, and an economic adviser to the 2016 presidential campaign of Senator Bernie Sanders

Zero Hedge — The Fed Sent $76BN To Treasury In 2022; It Is Now Sending $650 Million To Banks Every Day Instead

More handwringing over "losses." Well, one party's loss is another party's gain.

They still don't get that QE involves fiscal withdrawals comparable to taxes by transferring interest payments to government while the raising rate involves a fiscal injection comparable to deficit spending by increasing interest payments to nongovernment. That is, the former decreases aggregate net financial assets of non-government (reduces nongovernment net savings in aggregate) while the latter increases aggregate net financial assets of non-government (increases nongovernment net savings in aggregate). QT acts like raising rates in that when the Fed sells bonds or lets them mature, then interest payments to nongovernment increase as a consequence, hence aggregate net financial assets of nongovernment also increase. 

MMT 101. To understand the basics of reserve accounting and bank accounting, see MMT economist Eric Tymoigne's primer on money and banking here.  

See in this light, "losses" to government accounts are simply transfers (monetary flows) from government to nongovernment (through congressional appropriations and corresponding "spending") or "gains" to government accounts are transfers (monetary flows) from nongovernment to government. These flows alternatively increase or decrease the stock of nongovernment net savings in aggregate).

Note that "saving" denotes flow that increases a stock and "savings" denotes a stock. So a credit from government to nongovernment, while it appears to be a "loss" for government, if just a transfer in that government issues the currency, typically through the central bank simply by crediting nongovernment accounts. The act of crediting those accounts is currency issuance as a sole prerogative of a sovereign government. The notion that a government that is sovereign in its currency needs to get the currency it is constitutionally empowered to issue is a nonsense. 

Note also that not all governments are sovereign in their currency. To be sovereign in its currency, the government must be the monopoly issuer of a floating rate currency and also must not create obligations in currency it doesn't issue. US states and municipalities are not sovereign monetarily; only the federal government is. Members of the EZ ceded currency sovereignty to the ECB in the Maastricht Treaty and are subject to the rules of the treaty. Government that use other government's currency (Ecuador uses the USD) or fix the exchange rate (for example, by pegging to another currency) are not monetarily sovereign either. 

Incidentally, Russia is monetarily sovereign so it doesn't need to get rubles by exporting its resources. It funds itself. Moreover, it doesn't need foreign currency since it is mostly self-sufficient, being resource rich and having developed its own technology-based industry. Thus, the idea on which NATO strategy is based, namely, that sanctions or price caps are going to prevent Russia from prosecuting its military campaign, are simply wrongheaded. It won't of itself, although Russia could make mistakes. For instance, the fly in the ointment could be Elvira Nabiullina, head of the Central Bank of Russia, who is a neoliberal. On the other hand, she did wisely float the currency in 2015 when sanctions were first imposed.

Finally, this doesn't mean that governments have no constraints. The real constraint is availability for real resources including natural resources and capital resources, that is, industry and technology as well as institutions to support them, e.g, education and training, legal institutions, etc. The financial constraints are inflation and the variable exchange rate for governments that float their currency.

Zero Hedge
The Fed Sent $76BN To Treasury In 2022; It Is Now Sending $650 Million To Banks Every Day Instead
Tyler Durden


Alex Kimani

But see
Eve [should be Yves] Smith, economics correspondent on the site Naked Capitalism refers to a Bloomberg piece that claims that the oil cap is having an effect and has pushed down the price of Urals Crude to $37.50, a 53% discount to Brent Crude.

In fact [and as a former academic expert on western news agencies I find this is extrordinary] all the actual price trackers, including Thomson Reuters, are citing the price of Urals Crude at far higher levels, from $46 to $51.60.

Mercouris says he is beginning to become very frustrated with Bloomberg which he says has been spreading a series of stories whose main purpose is to suggest that western sanctions against Russia have been more effective than they really are. The series included the now discredited story that Russian oil exports had collapsed by 50% in December. A TASS report says that Russian and oil and gas revenues have increased 7.5% month on month in December, amounting to $13.5 billion, according to statistics from the finance ministry, representing an increase of 6% year on year.

Another Bloomberg story made the speculative claim that the recent increase in Russian military production was solely responsible for why Russian industrial production generally was holding up, something the story claimed was financially unsustainable. And now Bloomberg gives a wrong figure for the price at which Urals Crude is trading.

Mercouris says that he will in future be discounting anything that Bloomberg has to say about the Russian economy even if it is based on what appear to be reliable data. There is now a consistent pattern from Bloomberg of reporting things that are entirely wrong in that specific area of data reporting in which they always used to claim they were especially reliable.
Empire, Communication and NATO Wars
Something Big This Way Comes
Oliver Boyd-Barrett

See also

Zoltan Pozsar. Important. Geopolitics and global economics.

Strategic Culture Foundation (sanctioned by the US Treasury Department)
The 2023 War – ‘Setting the Theatre’
Alastair Crooke | founder and director of the Conflicts Forum, and former British diplomat and senior figure in British intelligence and in European Union diplomacy

Also at SFC
U.S. Jackals Smelling Blood i.e. a Prohibitively Huge Potential for Profit in the Russian Arctic
Natasha Wright

TASS — US may lose control of world finance due to conflict in Ukraine — French expert [Emmanuel Todd]

Todd attracted attention in 1976 when, at age 25, he predicted the fall of the Soviet Union, based on indicators such as increasing infant mortality rates: La chute finale: Essais sur la décomposition de la sphère Soviétique (The Final Fall: An Essay on the Decomposition of the Soviet Sphere). — Wikipedia

Emmanuel Todd is the author of After the Empire: The Breakdown of the American Order (2001). 

TASS (Russian state media)
US may lose control of world finance due to conflict in Ukraine — French expert [Emmanuel Todd]


The US not prepared for industrial warfare?

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Marcus Weisberger


Internationalist 360º
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F.M. Shakil

Prime Minister Modi’s 4R Global Agenda Confirms India’s Commitment To Multipolarity — Andrew Korybko

Prime Minister Modi opened up the virtual Voice Of Global South Summit on Thursday by introducing India’s official approach to the emerging Multipolar World Order to those representatives of the over 120 developing countries who were invited to participate in this historic event. It can be summarized as the 4R global agenda since the four operative terms begin with that letter and involve ways in which to make International Relations more democratic, equal, just, and predictable. Here’s what he proposed:

“Respond to the priorities of the Global South by framing an inclusive and balanced international agenda. Recognize that the principle of 'common but differentiated responsibilities' applies to all global challenges. Respect the sovereignty of all nations, the rule of law and peaceful resolution of differences and disputes. Reform international institutions, including the United Nations, to make them more relevant.”...
India under Modi is intent on carving out a position of leadership in the Global South, where Russia and China now dominate. This doesn't appear to be adversarial but a complementary approach to Russia and China. India has better relations with the Global North and West and it like to play a mediating role in the transition to a multipolar world.

Modi is for integration of the Global South and East into the world order on an equal basis where the historical dichotomy between colonial powers and colonies is relegated to history and both geopolitics and geoeconomics are no longer dominated by the colonial powers. After all, Russia, China, Iran, India, the Islamic world and others were formerly imperial powers as well. It is time to put that behind us and go ahead on an equal footing where not only the rights of all are respected but also the different traditions and cultures. 

World trade should be free and open in Modi's view. Unilateral sanctions are a violation of this principle.

Reform of the UN includes India's accession to the Security Council, in line with its size, power, and global influence.

Andrew Korybko's Newsletter
Prime Minister Modi’s 4R Global Agenda Confirms India’s Commitment To Multipolarity
Andrew Korybko, American geopolitical analyst and independent journalist based in Moscow, and member of the expert council for the Institute of Strategic Studies and Predictions at the People’s Friendship University of RussiaKo

Thursday, January 12, 2023

Transitoriness — Brian Romanchuk

The latest CPI report for the United States suggests that the inflation spike after 2020 was transitory in the rather weak sense that I understood the term “transitory.” I am curling in a bonspiel over the next few days, so I do have a long time to spend on this article, so I just want to outline my thinking on the topic of “transitory.”...
Bond Economics
Brian Romanchuk