An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Wednesday, October 18, 2023
Scotonomics — Moving past straw-man version of Modern Monetary Theory
And nothing in there about the price anchor, which is core to MMT.
That looks very much like the version of MMT the Post Keynesians would like to see - thereby missing the core issue completely.
"Drain reserve balance accounts of private banks held at the central bank to control the base rate of interest. These funds are swapped for bonds, or bonds are swapped for cash to maintain a required base rate, aka the price of cash."
That hasn't happened for the best part of 20 years. It certainly isn't how the UK works. Quite why some within MMT cling to it is beyond me.
Neil we just went thru a period of giving people free munnie and its believed that it has resulted in “inflation “…
So even if you give people free munnie to actually do something like idk an hour of gender studies or maybe an hour of climate nutter studies how is that going to “anchor prices”?
If you just look at what an hour of gender studies costs then maybe…
But at some point these morons discard the Art degree figure of speech “inflation” and start to look at the scientific measured price of a gallon of gasoline (ie not an hour of climate nutter studies) and if the price of a gallon of gasoline has gone up then they go back to the figure of speech “inflation!” and all hell breaks loose… CB increases risk feee rate, bank reserve balances are reduced, etc…
I don’t see how fixing the price of non productive activity is going to “anchor” the price of productive activity..,,
Would probably destabilize it imo just like we’ve witnessed the last few years…
So you have people who have to go out and produce the real products then you give people free munnie to work from home to produce gender studies then you look at the prices of the real products that the people who have to go out and produce and if those prices go up you have “inflation!” meanwhile the price for a stay at home gender study is static…
I don’t see the functional relationship between the prices of those two types of activities 🤔
Matt isn't that the crux of the UBI vs jobs guarantee debate? The main point of the jobs guarantee is to help people transition back to private sector work solving by demonstrating employability. If they can be "productive" during this time, even better. I suppose this gets into the bigger question of what is "productive". Gender studies might be easy to attack as unproductive but you can make the argument for a lot of professions. What about all the people dedicated to the privatized pension industry aka half of wall st. What about people all those silicon valley VCs. Where do you draw the line? Who gets to decide?
"I don’t see the functional relationship between the prices of those two types of activities"
If you don't like people doing Community Service for a wage, hire them to do something else. The solution is in your (ie the private sector's) hands. What's the problem?
If you think that is a better job that you are currently doing you are welcome to take up Community Service and get paid the living wage for it.
Perfectly fair.
The level of output is mostly a matter for the private sector. That's why those in charge there get paid. Otherwise we don't need them and can revert to a centrally planned system. Ultimately Community Service can be turned towards food and energy production if the private sector fails in its task.
The auto-stabiliser system is simply maintaining demand spatially and temporally to prevent good capital from being destroyed, while weeding out those firms who add no value - without significantly disadvantaging those who work in failing firms. And it ensures a distribution of output to everybody.
I'm presuming you are not a Scrooge and wish the destruction of the surplus population. And I also presume you don't believe it is "their fault" they are unemployed. Unemployment is a systemic issue, not an individual issue.
Something that would become crystal clear once there are sufficient jobs for all. The workers would work, and the shirkers would get nothing.
And, of course, once you have the auto stabiliser in place you can drop interest rates to zero and sack all the money changers in the temples.
A whole layer of rentier inefficiency then disappears. Simplify the tax system and you get rid of a whole load more.
Why is it ok that they currently get 'real output' when they add zero value to the system, but the unemployed who are unemployed for no fault of their own should get nothing?
The prices of products (CPI) don’t have any functional relationship to a JG wage because the JG activities are not part of any production of products anyone cares about… like food, gasoline , power, etc…
Imo it Would tend to increase consumption of those products and prices would probably increase…
Which is what we have just witnessed over the last 3 years…
You can’t say this : “ The main point of the jobs guarantee is to help people transition back to private sector work solving by demonstrating employability.”
And this : “ Unemployment is a systemic issue, not an individual issue.”
At the same time…
Statement 1 blames UE on the individual and statement 2 blames systemic factors…
And what happened to MMT ZIRP policy now with Brandon increasing rates in unprecedented fashion and fomenting the most regressive economic outcomes in post WW2 history?
Crickets….
Cant criticize Democrats?
They are all political partisans nothing more….
Technically unqualified and inadequate,,,
“Price anchor!” … yeah ok… meanwhile everyone is going all around every day saying “inflation!”….
"The prices of products (CPI) don’t have any functional relationship to a JG wage "
Of course they do. To produce items you can't pay less than the JG wage - or you won't get any staff. Price of items are a mark up on costs - largely labour costs - direct or indirect.
"Statement 1 blames UE on the individual and statement 2 blames systemic factors"
Only if you have some very think blinkers on Matt and a very rigid viewpoint.
Unemployment is a systemic issue, people need jobs, which gives them income, which they spend. That increases demand which the private sector then services by hiring people from the Job Guarantee who now have a work history to ease their passage into the private sector.
It's a bootstrap mechanism and derisking mechanism. That increases efficiency and allows us to operate at about 2% frictional unemployment rather than 5 or 6 as at present.
"Yo they ALREADY HAD a work history BEFORE they became unemployed"
And we're playing hole in my bucket again.
Unemployment is a systemic issue, not an individual issue. The private sector is incapable of creating sufficient work on its own because it cannot obtain the necessary system signals to do so.
The transition system fixes that, as well as making sure that *everybody* who wants to work can do *and* gets sufficient output for the supply of their *labour hours*.
The transformation of labour hours into labour services is the problem of capitalists. What the JG does is stop them externalising the difficult stuff - much as we ban them from polluting rivers with effluent.
If you hold the view that the unemployed need to be punished by your vengeful sky fairy for some personal failing, then we have a fundamental disagreement.
“ Unemployment is a systemic issue, not an individual issue. ”
I agree , but then why imply people who are thrown out of their jobs and unemployed don’t know how to work or hold a job?
It’s insulting and hypocritical… but most if not all the MMT people are all Art degree trained in hypocrisy so this probably shouldn’t be surprising.,,
Dude gets trained as technician working at a refinery for 20 years going in every day from ding to dong … Art degree climate nutter cultists think oxidizing hydrocarbons is going make all the icebergs melt and the water is going to come up and we’re all going to have to tread water…
Get a govt policy change so we all don’t have to tread water and shut down the refinery..,
Technician gets thrown out of his job…
MMT then says “hey! That guy needs to prove he can hold a job!”
(WHEN HE JUST HELD A FUCKING JOB FOR 20 FUCKING YEARS!)
Yes, it's the status quo. Keep them unemployed and desperate. Keep the unemployable on welfare or disability. Get Social Darwinists to talk trash about useless eaters to taxpayers.
And nothing in there about the price anchor, which is core to MMT.
ReplyDeleteThat looks very much like the version of MMT the Post Keynesians would like to see - thereby missing the core issue completely.
"Drain reserve balance accounts of private banks held at the central bank to control the base rate of interest. These funds are swapped for bonds, or bonds are swapped for cash to maintain a required base rate, aka the price of cash."
That hasn't happened for the best part of 20 years. It certainly isn't how the UK works. Quite why some within MMT cling to it is beyond me.
Neil we just went thru a period of giving people free munnie and its believed that it has resulted in “inflation “…
ReplyDeleteSo even if you give people free munnie to actually do something like idk an hour of gender studies or maybe an hour of climate nutter studies how is that going to “anchor prices”?
If you just look at what an hour of gender studies costs then maybe…
But at some point these morons discard the Art degree figure of speech “inflation” and start to look at the scientific measured price of a gallon of gasoline (ie not an hour of climate nutter studies) and if the price of a gallon of gasoline has gone up then they go back to the figure of speech “inflation!” and all hell breaks loose… CB increases risk feee rate, bank reserve balances are reduced, etc…
I don’t see how fixing the price of non productive activity is going to “anchor” the price of productive activity..,,
Would probably destabilize it imo just like we’ve witnessed the last few years…
Here’s Musk on this:
ReplyDeletehttps://x.com/unusual_whales/status/1714947245802750188?s=61&t=2WPBW-5PNOSZxkEWhNtQfw
“ Elon Musk said on the $TSLA earnings call, per Reuters:
How detached from reality does the work-from-home crowd have to be while they take advantage of those who cannot work from home.”
So you have people who have to go out and produce the real products then you give people free munnie to work from home to produce gender studies then you look at the prices of the real products that the people who have to go out and produce and if those prices go up you have “inflation!” meanwhile the price for a stay at home gender study is static…
ReplyDeleteI don’t see the functional relationship between the prices of those two types of activities 🤔
Matt isn't that the crux of the UBI vs jobs guarantee debate? The main point of the jobs guarantee is to help people transition back to private sector work solving by demonstrating employability. If they can be "productive" during this time, even better.
ReplyDeleteI suppose this gets into the bigger question of what is "productive". Gender studies might be easy to attack as unproductive but you can make the argument for a lot of professions. What about all the people dedicated to the privatized pension industry aka half of wall st. What about people all those silicon valley VCs. Where do you draw the line? Who gets to decide?
"I don’t see the functional relationship between the prices of those two types of activities"
ReplyDeleteIf you don't like people doing Community Service for a wage, hire them to do something else. The solution is in your (ie the private sector's) hands. What's the problem?
If you think that is a better job that you are currently doing you are welcome to take up Community Service and get paid the living wage for it.
Perfectly fair.
The level of output is mostly a matter for the private sector. That's why those in charge there get paid. Otherwise we don't need them and can revert to a centrally planned system. Ultimately Community Service can be turned towards food and energy production if the private sector fails in its task.
The auto-stabiliser system is simply maintaining demand spatially and temporally to prevent good capital from being destroyed, while weeding out those firms who add no value - without significantly disadvantaging those who work in failing firms. And it ensures a distribution of output to everybody.
I'm presuming you are not a Scrooge and wish the destruction of the surplus population. And I also presume you don't believe it is "their fault" they are unemployed. Unemployment is a systemic issue, not an individual issue.
Something that would become crystal clear once there are sufficient jobs for all. The workers would work, and the shirkers would get nothing.
And, of course, once you have the auto stabiliser in place you can drop interest rates to zero and sack all the money changers in the temples.
ReplyDeleteA whole layer of rentier inefficiency then disappears. Simplify the tax system and you get rid of a whole load more.
Why is it ok that they currently get 'real output' when they add zero value to the system, but the unemployed who are unemployed for no fault of their own should get nothing?
I’m just saying it’s not a “price anchor”…
ReplyDeleteThe prices of products (CPI) don’t have any functional relationship to a JG wage because the JG activities are not part of any production of products anyone cares about… like food, gasoline , power, etc…
Imo it Would tend to increase consumption of those products and prices would probably increase…
Which is what we have just witnessed over the last 3 years…
You can’t say this : “ The main point of the jobs guarantee is to help people transition back to private sector work solving by demonstrating employability.”
ReplyDeleteAnd this : “ Unemployment is a systemic issue, not an individual issue.”
At the same time…
Statement 1 blames UE on the individual and statement 2 blames systemic factors…
Can’t have it both ways… make a decision…
Lots of this type of hypocrisy in MMT…,
And what happened to MMT ZIRP policy now with Brandon increasing rates in unprecedented fashion and fomenting the most regressive economic outcomes in post WW2 history?
ReplyDeleteCrickets….
Cant criticize Democrats?
They are all political partisans nothing more….
Technically unqualified and inadequate,,,
“Price anchor!” … yeah ok… meanwhile everyone is going all around every day saying “inflation!”….
"The prices of products (CPI) don’t have any functional relationship to a JG wage "
ReplyDeleteOf course they do. To produce items you can't pay less than the JG wage - or you won't get any staff. Price of items are a mark up on costs - largely labour costs - direct or indirect.
I mean seriously. This isn't hard.
"Statement 1 blames UE on the individual and statement 2 blames systemic factors"
ReplyDeleteOnly if you have some very think blinkers on Matt and a very rigid viewpoint.
Unemployment is a systemic issue, people need jobs, which gives them income, which they spend. That increases demand which the private sector then services by hiring people from the Job Guarantee who now have a work history to ease their passage into the private sector.
It's a bootstrap mechanism and derisking mechanism. That increases efficiency and allows us to operate at about 2% frictional unemployment rather than 5 or 6 as at present.
“ who now have a work history to ease their passage into the private sector. ”
ReplyDeleteYo they ALREADY HAD a work history BEFORE they became unemployed…
THATS why they are now “unemployed”…
"Yo they ALREADY HAD a work history BEFORE they became unemployed"
ReplyDeleteAnd we're playing hole in my bucket again.
Unemployment is a systemic issue, not an individual issue. The private sector is incapable of creating sufficient work on its own because it cannot obtain the necessary system signals to do so.
The transition system fixes that, as well as making sure that *everybody* who wants to work can do *and* gets sufficient output for the supply of their *labour hours*.
The transformation of labour hours into labour services is the problem of capitalists. What the JG does is stop them externalising the difficult stuff - much as we ban them from polluting rivers with effluent.
If you hold the view that the unemployed need to be punished by your vengeful sky fairy for some personal failing, then we have a fundamental disagreement.
“ Unemployment is a systemic issue, not an individual issue. ”
ReplyDeleteI agree , but then why imply people who are thrown out of their jobs and unemployed don’t know how to work or hold a job?
It’s insulting and hypocritical… but most if not all the MMT people are all Art degree trained in hypocrisy so this probably shouldn’t be surprising.,,
Here’s MMT:
ReplyDeleteDude gets trained as technician working at a refinery for 20 years going in every day from ding to dong … Art degree climate nutter cultists think oxidizing hydrocarbons is going make all the icebergs melt and the water is going to come up and we’re all going to have to tread water…
Get a govt policy change so we all don’t have to tread water and shut down the refinery..,
Technician gets thrown out of his job…
MMT then says “hey! That guy needs to prove he can hold a job!”
(WHEN HE JUST HELD A FUCKING JOB FOR 20 FUCKING YEARS!)
how stupid are these people?
I agree , but then why imply people who are thrown out of their jobs and unemployed don’t know how to work or hold a job?
ReplyDeleteDo you have statistics for that claim?
It's mostly the Mitt Romney "useless eaters" pro microeconomics types who make that argument.
Technician gets thrown out of his job…
ReplyDeleteSo the "Laid off" box is ticked. That's not an interview killer.
Well, tell it to the MMT people
ReplyDeleteSo what's the solution then if not Job Guarantee? It can't be the status quo...
ReplyDeleteYes, it's the status quo. Keep them unemployed and desperate. Keep the unemployable on welfare or disability. Get Social Darwinists to talk trash about useless eaters to taxpayers.
ReplyDelete“ So what's the solution then”
ReplyDeleteDon’t increase prices govt pays for things or let’s their banks lend against things.,,
Or if you do that, at least acknowledge that those prices are going to increase from that policy change..,
eg Right now govt has an open bid of $79/bbl on crude to refill SPR…
Yet there are people there who think the price should go below $79…
🤔
But the The most basic problem is an academic practice that results in this type of thinking..,
We had stable real estate prices during Obama years of ZIRP ie zero rates…
ReplyDeleteBut the GSEs never increased the conforming loan limit from $417k the whole time…
https://www.hsh.com/mortgage/a-history-of-conforming-fanniefreddie-loan-limits.html
ReplyDelete