tag:blogger.com,1999:blog-2761684730989137546.post2990196680282468047..comments2024-03-29T02:19:19.866-04:00Comments on Mike Norman Economics: Stephanie Kelton — Op-Ed — Congress can give every American a pony (if it breeds enough ponies)mike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger98125tag:blogger.com,1999:blog-2761684730989137546.post-69780456708521559022017-10-31T00:12:33.854-04:002017-10-31T00:12:33.854-04:00EKH: Thanks for the response, especially consideri...EKH: Thanks for the response, especially considering my pedantic tone :-).<br /><br /><i>I conclude that you do not heed your own advice.</i> Mostly, you're right here.<br /><br /><i>You say: the lack of slow and careful reasoning leads to making flatly false, indeed absurd statements like ‘budget surpluses are needed to pay off earlier deficits.’ Do you really believe this?” This is not a question of belief but of logic. </i><br /><br />Right. It is a question of logic. Formalize what you're saying or use a toy model and one can see that the necessity of later surpluses is a non sequitur.<br /><br /><i>It is self-contradictory of MMTers to say money is basically an IOU without taking into consideration that IOU’s have to be redeemed in finite time.</i><br />No, they emphatically do take this into consideration. Scott Fulwiller in particular has written 'the last (latest) word' on such "fiscal sustainability" points - following Evsey Domar (and Keynes, Lerner etc.) The point of logic is that this redemption in a finite, or even explicitly bounded time does <b>NOT</b> imply "budget surpluses are needed to pay off earlier deficits", or "Money that is created by government deficits has eventually to be destroyed by government surpluses." And this is <i>not</i> by inflating debts out of existence, which one could call inflationary default if you want. <br /><br />The true statement, that follows from the idea of money as credit, under reasonable interpretations, is that "(Net) Money that is created by government deficits [best to think of all government spending as money creation] has eventually to be destroyed by government taxation [not surpluses]". Something different and rather weaker. <br /><br />MMT expositions rightly call many things myths. But they usually conspicuously omit how the idea that these myths are trying to get at is incorporated in MMT. I.e. how these myths are sorta true, which is why they have staying power. Trying to defeat something with nothing is not the best tactics or teaching. <br /> <br />I would explain more now, and will later, but I feel a cold coming on. I apologize for not having the time to respond in a more timely fashion.<br /><br />Salsabob- Probably said this before, but the JG and other tools against inflation are "operationalizing the inflationary constraint". MMT and its ancestors have done the best job of all schools doing so - because their brand of economics is the one that is practically applicable and makes logical sense. Don't trust me - trust Hayek's praise of his buddy Keynes's ingenious ideas against inflation, say. On the other hand, far from being a constraint, deficit hysteria (like high interest) leads to big, bad deficits and in all likelihood, long term inflation. That's part of the deficit hysteria game plan. <br /><br />Joe - that is absolutely right. If you look at it more carefully the common sense view that you can't destroy something until you create it always applies, at least if you talk about things in common sense language. IMHO using any other view or language is generally a bad idea, a way to confuse yourself and others.Calgacushttps://www.blogger.com/profile/06031818010224747000noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-67127603519517432842017-10-08T20:24:54.392-04:002017-10-08T20:24:54.392-04:00"The big secret in Washington is that the fed..."The big secret in Washington is that the federal government abandoned TABS back when it dropped the gold standard."<br /><br />I don't think that's correct, rather I don't think TABS (taxes and borrowing precede spending) ever applied.<br /><br />You can't collect taxes in dollars unless you've first created the dollars. Now it just may be that the government could only create dollars in exchange for gold, but you're still creating the dollars before you can tax them back. You're allowing yourself to "pure" deficit spend only on gold. Which is just as arbitrary of a self-constraint as is requiring bonds to be sold in an amount equal to the deficit.Joehttps://www.blogger.com/profile/15197727918414570446noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-81552889823655665522017-10-06T07:23:07.338-04:002017-10-06T07:23:07.338-04:00Tom Hickey
You say: “There is a tendency to see e...Tom Hickey<br /><br />You say: “There is a tendency to see economic issues and solely or chiefly economic. This is a huge mistake, since the economy is the life support system of society and society has social and political aspects in addition to economic. … Conventional macroeconomics is junk science and involves special pleading when used for justification in policy formulation.”<br /><br />Both micro and macro is junk science. And MMT is a prolific junk producer because it is based on provably false macrofoundations. Because MMT lacks the true theory it is not more than soapbox economics.<br /><br />It holds: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)<br /><br />There is political economics and theoretical economics. The main differences are: (a) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (b) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.<br /><br />Theoretical economics (= science) has been body-snatched by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the past 200+ years. MMT is part of political economics.<br /><br />Methodologically it holds: If it isn’t macro-axiomatized, it isn’t economics.#1 Because of this, neither Walrasianism, Keynesianism/MMT, Marxianism, Austrianism is economics. The four main approaches have no truth value, merely some political use value. Politics needs no true theory only some populist rhetoric and some pseudo-scientific make-up.<br /><br />MMT is refuted on all counts.#2 There is NO place for MMTers in science. Politics and science have to be strictly separated and MMT has to be given the marching orders because of proven scientific incompetence.<br /><br />Egmont Kakarot-Handtke<br /><br />#1 The ethics of science is consistency ― economics is inconsistent<br />http://axecorg.blogspot.de/2017/09/the-ethics-of-science-is-consistency.html<br /><br />#2 See cross-references MMT<br />http://axecorg.blogspot.de/2017/07/mmt-cross-references.htmlAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-81963130284316277872017-10-05T11:24:10.908-04:002017-10-05T11:24:10.908-04:00The constraint of deficit hysteria might just be t...<i>The constraint of deficit hysteria might just be the best pragmatic one available for some time to come, no?</i><br /><br />1. A fundamental flaw with using deficit hysteria and debt phobia to bridle politicians is that this is already in place and the result is "bad deficits" (those that don't address social issues like chronic unemployment and growing asymmetry) and bad spending (unproductive spending on military and wars of choice).<br /><br />The way to resolve this is through better government and education for democracy. <br /><br />Better government requires addressing the selection process, which where the the problems are now being generated. A sine qua non is getting the big money out of politics.<br /><br />Better education for democracy involves taking democracy seriously and educating people chiefly for citizenship rather than chiefly for a job as a cog in the machine. The price of freedom is vigilance. Presently, democracy is being hijacked, and liberty is in decline in order to further the reach of empire.<br /><br />2. A basic idea of MMT is to use functional finance principles to create automatic stabilization that carries the heavy load so that the JG is a mop up operation of residual unemployment (those slipping through the cracks), because an economy cannot be fine tuned.<br /><br />4. There is a tendency to see economic issues and solely or chiefly economic. This is a huge mistake, since the economy is the life support system of society and society has social and political aspects in addition to economic. Homo economicus is an idealization that makes formalization tractable. As a simplification, it filters the data. The question is whether relevant data is being filtered out that affects the model when it is applied socially and politically. The answer is, OBVIOUSLY! Conventional macroeconomics is junk science and involves special pleading when used for justification in policy formulation.<br /><br />Homo economicus has limited use in microeconomics and no use at all in macroeconomics used as a policy science. "Macroeconomics" implies that macro is scaled up micro through aggregation. This falls victim to the fallacy of composition, and micro itself is a victim of oversimplification by assuming methodological individualism (homo economicus, representative agent, rational choice). <br /><br />"Macroeconomics" needs to be rename "political economy" and the approach needs to be overhauled to bring it in line with evidence regarding outcomes. I am with Matt here. If you can't write a deterministic function that evidence supports, you most likely don't know what you are talking about and should severely qualify your claims if you make any.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-14470442648500862052017-10-05T10:42:18.002-04:002017-10-05T10:42:18.002-04:00TH said - "Optimizing growth, running actual...TH said - "Optimizing growth, running actual full employment less transitional, and keeping inflation moderate is a balancing act. Jugglers need all their faculties in order to juggle knives successfully."<br /><br />Yes, well said.<br /><br />Moving further, however -<br /><br />How many steps are there currently between linking unemployment to direct Congressional actions? How many other players (e.g. FED monetary policy) can be linked (i.e. blamed)?<br /><br />With JG, as a "price anchor," the link between one's job/wages and how a Congressional critter votes would be glaringly obvious. Do you know a Senator/Representative that is dying to sign up for that?<br /><br />Perhaps the best productive tax cut to spur the economy would be the payroll taxes, no? But it's mirror image, the best productive tax increase to tame inflation would be the payroll taxes, yes? Just imagine what today's Congressional critters would do in the latter situation.<br /><br />Is there way to operationalize the inflationary constraint in today or tomorrow's reality? <br /><br />The constraint of deficit hysteria might just be the best pragmatic one available for some time to come, no?Salsabobhttps://www.blogger.com/profile/06056713962363584884noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-82743130439556236422017-10-05T10:28:08.480-04:002017-10-05T10:28:08.480-04:00Egmont, your analysis is steady-state perturbation...Egmont, your analysis is steady-state perturbations - existing levels of deficit spending are perturbed with an increase in deficit spending, and a new steady state is achieved,.... and all is well again. Inflation don't play that.<br />Take some calculus classes.Salsabobhttps://www.blogger.com/profile/06056713962363584884noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-68936627085877692752017-10-05T05:16:26.367-04:002017-10-05T05:16:26.367-04:00Salsabob
(i) You say: “What you do get correct is...Salsabob<br /><br />(i) You say: “What you do get correct is the potential consequence of price increases from increased deficit spending. Congratulations, you have discovered MMT’s inflationary constraint …”<br /><br />There is NO such thing as an inflationary constraint. Both Orthodoxy AND MMT get the inflation issue wrong.#1 Both Orthodoxy AND MMT is proto-scientific garbage. Both Orthodoxy AND MMT is refuted according to the scientific standards of material and formal consistency.<br /><br />(ii) You say: “Every MMTer will spend substantial energy chastising federal debt/deficit hysteria and the budget constraint mythology, but give only lip service to the inflationary constraint…. What most will say is that they are just economists, or that MMT needs to be pure, an operational description, a school of economic thought; must remain aloof of policy and politics …”<br /><br />There is political economics and theoretical economics. The main differences are: (a) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (b) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.#2<br /><br />Theoretical economics (= science) has been body-snatched by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the past 200+ years. MMT is part of political economics. More precisely, MMT advances the cause of the one-percenters under various populist social pretexts of which Stephanie Kelton’s ‘Pony for every American’ is the most recent example. MMT policy proposals have NO scientific foundations at all.#2<br /><br />(iii) MMT is scientifically unacceptable. MMTers are scientifically incompetent. MMT is refuted on all counts.#3 The only thing MMTers can do for human progress is to get out of the way.<br /><br />Egmont Kakarot-Handtke<br /><br />#1 MMT was right all along: Gov-Deficits do NOT cause inflation<br />http://axecorg.blogspot.de/2017/10/mmt-was-always-right-gov-deficits-do.html<br /><br />#2 MMT: scientific incompetence or political fraud?<br />http://axecorg.blogspot.de/2017/09/mmt-scientific-incompetence-or.html<br /><br />#3 For details see cross-references MMT<br />http://axecorg.blogspot.de/2017/07/mmt-cross-references.htmlAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-3331427807265285372017-10-03T12:47:10.086-04:002017-10-03T12:47:10.086-04:00Virtually all economists admit that capitalist pro...Virtually all economists admit that capitalist production runs off investment.<br /><br />Conventional economists fall into the trap of assuming that saving funds investment based on the false assumption financial intermediation and loanable funds. MMT corrects that misunderstanding arising from failure to understand operations correctly.<br /><br />There is little argument over the generality that interest rates influence investment.<br /><br />Conventional economists fall into the trap of falsely assuming that market set interest rates and that public deficits crowd out investment in competition for loanable funds. MMT also corrects this misunderstanding.<br /><br />MMT holds that an important tool for way optimizing productive investment and reduce financial rents is for the currency monopolist to set the base rate to zero and not to issue public debt other than very short term debt that is effectively equivalent to cash. <br /><br />That necessitates abandoning the course of using monetary policy to control inflation by raising the interest rate in order to cool inflation by reducing wage pressure. The existing policy is to use interest rate setting in order to generate unemployment to target the rate of change of the price level by controlling firms' wage bill. <br /><br />People criticize specific points about MMT without understanding how everything fits together in the macro theory. In order to resolve the trifecta of growth, employment, and price stability, the whole theory has to be implemented.<br /><br />When asked if MMT recommendation could be adopted effectively without also implementing the JG, Warren responded in effect, Sure, but don't blame the theory if inflation results.<br /><br />As Warren also points out, there is always some price anchor in a monetary production economy. Under a gold standard it is the fixed rate. Under NAIRU it is the imputed but unobservable "natural rate." Under the MMT JG the price anchor is what the government is willing to compensate for a specified period of unskilled labor.<br /><br />Critics claim that a JG is not an effective price anchor. They should show then that the natural rate that NAIRU assumes is. Evidence appears to contest that. Or they should argue for another price anchor like a return to gold. Then the tradeoffs involved with that policy can be debated.<br /><br />Optimizing growth, running actual full employment less transitional, and keeping inflation moderate is a balancing act. Jugglers need all their faculties in order to juggle knives successfully.<br /><br />MMT has puts an alternative on the table to a system that is working well only for a relatively small percentage of the population in nations and the global economy under the present policy regime, which can be broadly characterized as neoliberal and based on neoclassical economic analysis and assumptions.<br /><br />What other alternatives are available? What are the likely tradeoffs? What are the foreseeable opportunities and challenges?Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-77159184687020403182017-10-03T11:52:29.334-04:002017-10-03T11:52:29.334-04:00Egmont, your fundamental flaw is your assumption t...Egmont, your fundamental flaw is your assumption that central government debt will eventually need to be paid off at some point. You compound your flaw by assuming that when that debt comes due it will be paid by household taxes. Simply, that's wrong.<br /><br />What you do get correct is the potential consequence of price increases from increased deficit spending. Congratulations, you have discovered MMT's inflationary constraint - you just go about it an ego-stroking convoluted manner that makes people tune you out, and thereby your contribution to the field will be about nil.<br /><br />All Cullen is noting is that on the gradient of productive to non-productive deficit spending, non-productive spending gets you faster to the inflationary constraint, whether that is isolated to a particular segment (e.g. ponies, health care, education) or more broadly throughout the economy depends on the scope and scale of the deficit expenditures. <br /><br />Every MMTer will spend substantial energy chastising federal debt/deficit hysteria and the budget constraint mythology, but give only lip service to the inflationary constraint (Cullen, at least, raises the non-productive spending aspect). What most will say is that they are just economists, or that MMT needs to be pure, an operational description, a school of economic thought; must remain aloof of policy and politics; that deciding how to operationalize the inflationary constraint to avoid hyperinflation is a job for some one else.<br /><br />I think the public, and even most politicans, have an intuitive sense that there is no "free money" - they might not go through your gyrations of calculations, but they know something is not right about free ponies for everyone, or cut every tax the Right can find, or throw money at every problem the Dems can find. Until MMT can come up with a sell-able operational mechanism to impose the inflationary constraint,they will go unheeded, and I will thank the stars that the only currently operational inflationary constraint, debt/deficit hysteria, more or less constrains. Salsabobhttps://www.blogger.com/profile/06056713962363584884noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-11590746348326080792017-10-02T09:28:53.690-04:002017-10-02T09:28:53.690-04:00It will be a while before this becomes clear, but ...It will be a while before this becomes clear, but at the moment PR looks like a war zone and that is a very difficult situation to deal with even with committing all resources available when the resources are considerable, based on what the general in charge is saying on the ground there.<br /><br />It looks like the response may have been tardy but apparently no one foresaw the amount of damage that was possible from a storm like this. <br /><br />Sure, things could have been done better, they always can in hindsight, but this really seems to be unprecedented.<br /><br />Trump has really blown it personally in his handling of the public relations — basically has shot himself in the foot and made the whole operation look bad.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-47476061752820018802017-10-02T08:45:53.356-04:002017-10-02T08:45:53.356-04:00Look at the Puerto Rico situation caught short of ...Look at the Puerto Rico situation caught short of qualified critical civil defense and disaster recovery personnel in light of the Job Guaranty .... you could employ unemployed people in Training for civil response/disaster recovery and never train enough people for the surges required in a situation like this... <br />Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-29096174171532398242017-10-02T07:44:08.432-04:002017-10-02T07:44:08.432-04:00Part 2
(v) As my example above shows, MMT policy ...Part 2<br /><br />(v) As my example above shows, MMT policy makes the household sector WORSE off. In real terms, the wage income receivers’ part of output is reduced in period 1 and it does NOT matter whether this happens via a tax or via a price increase. But with immediate taxation the matter is settled in real AND financial terms in period 1. With government deficit spending the matter is NOT settled. The wage income receivers have to pay via taxes the interest for the government debt as long as it is revolved. The government taxes on behalf of the business sector who holds part or all of the government debt in the form of securities. Ultimately, the household sector has to pay the tax because the government debt has eventually be redeemed. MMT policy simply amounts to a tax deference program with income redistribution via interest over a very long time. Seen from beginning to the logical end, MMT policy makes the household sector worse off. ALL benefits are clearly on side of the business sector. To sell MMT as a social program to Sanders/Corbin is either self-deceptive stupidity or a fraud.<br /><br />(vi) Deficit spending is since Keynes the main cause of the accelerating income redistribution.#5<br /><br />(vii) MMT is simply the wrong way to boost employment and to realize all the other social improvements MMT claims to bring. For the correct macro employment theory see #6.<br /><br />(viii) Stated MMT policy goals are one thing. They are NOT the issue here. The point is that MMT policy guidance has no sound scientific foundations. MMT economic theory is axiomatically false. Scientifically, MMT is not different from the flat earth theory. MMT has NO truth value, only some political use value. All poofs can be found in #4.<br /><br />Time for all MMTers to stop blathering and advancing the cause of the one-percenters under a social pretext and finally to do their scientific homework.<br /><br />Egmont Kakarot-Handtke<br /><br />#1 From Marshall to Georgescu-Roegen<br />https://axecorg.blogspot.de/2014/12/from-marshall-to-georgescu-roegen.html<br /><br />#2 Rectification of MMT macro accounting<br />https://axecorg.blogspot.de/2017/09/rectification-of-mmt-macro-accounting.html<br /><br />#3 Solving Mill’s starting problem<br />https://axecorg.blogspot.de/2017/09/solving-mills-starting-problem.html<br /><br />#4 For details of the big picture see cross-references MMT<br />http://axecorg.blogspot.de/2017/07/mmt-cross-references.html<br /><br />#5 Keynesianism as ultimate profit machine<br />http://axecorg.blogspot.de/2015/07/keynesianism-as-ultimate-profit-machine.html<br /><br />#6 Macrofounded labor market theory<br />https://axecorg.blogspot.de/2017/07/macrofounded-labor-market-theory.htmlAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-67788139199642402182017-10-02T07:43:08.604-04:002017-10-02T07:43:08.604-04:00Calgacus
(i) I interpreted Wray’s statement “mone...Calgacus<br /><br />(i) I interpreted Wray’s statement “money is a cross-balance sheet RELATIONSHIP” as a reference to the development of double-entry bookkeeping in medieval Europe. If the credits for the correct definition of money go actually to Mitchell-Innes I appreciate your clarification.<br /><br />(ii) You say: “Computer science in education today plays a similar role to Euclid for millennia ― providing intellectual rigor and discipline.” I fully agree as you could infer from the fact that I strictly apply the axiomatic-deductive method.#1<br /><br />(iii) You say: “These errors are due like all errors to not subjecting ones thought to discipline like mathematical proof, the discipline of writing programs that work or of testing theory by experiments. Another mistake is in debating technique ― if you want to say MMT is wrong, you have to quote an MMT statement, try to read it as the author meant, and show that it is wrong by logic, leads to a conclusion universally held to be wrong.”<br /><br />I agree. From the fact that you obviously have not realized that the proofs have already been given#2,#3 I conclude that you do not heed your own advice. Take notice that it is proven that MMT is axiomatically false. Because the foundational premises of MMT are false the whole analytical superstructure is false. MMT is scientifically worthless.#4<br /><br />(iv) You say: the lack of slow and careful reasoning leads to making flatly false, indeed absurd statements like ‘budget surpluses are needed to pay off earlier deficits.’ Do you really believe this?” This is not a question of belief but of logic. Money is a credit relationship, a generalized IOU that is continuously created and destroyed. If the government runs a deficit in period 1 this takes the form of overdrafts on the asset side of the balance sheet of the central bank and of deposits = money on the liability side. This is the creatio-ex-nihilo step. Being a credit relationship there must LOGICALLY be the inverse operation. Practically, the government can redeem its overdrafts at the central bank if it taxes the household sector, that is by running a budget surplus. What government can also practically do, though, is to indefinitely postpone the logically inverse operation to money creation. It is self-contradictory of MMTers to say money is basically an IOU without taking into consideration that IOU’s have to be redeemed in finite time. Practically, this has NOT been done, of course, and the proof is in the continuously growing public debt. But logically it has to be done. It is one of the political dishonesties of MMT to assert that money is a debt that has never been paid back and never will. Money that is created by government deficits has eventually to be destroyed by government surpluses. What we have historically seen is only the first part of the whole story. Note that this is NOT an obsession with balanced budgets but follows logically from the concept of money as a credit relationship. If it is credit it has to be paid back eventually. But logic has never been the strong point of MMT.<br /><br />See Part 2AXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-70242501261132260862017-10-02T00:54:42.281-04:002017-10-02T00:54:42.281-04:00Quick comments on EKH's last salvo:
As long as...Quick comments on EKH's last salvo:<br /><i>As long as the debt is revolved, all is fine. Interest for the public debt is reliably taken from the household sector via taxes and transferred to the bond holding business/banking sector. This is an additional benefit for the one-percenters of the MMT way of doing things.</i> This is not the MMT way of doing things. The MMT way is ZIRP. No bonds. No debt (according to a wrong manner of speaking). No interest paid "to the bond holding business/banking sector". A point I neglected above - it is always not really legitimate to say money taken by taxes is given to somebody else, but it can have some meaning at full employment. Below full employment, which you aren't going to get without MMT, it is nonsense to speak of "transfer". As always, as needs to be noted incessantly, bad mainstream arguments depend on invalid full employment assumptions.<br /><br /><i>Compared to the redistribution via a balanced budget the same real redistribution via budget deficits</i> MMT / Keynes is not about "redistribution" but about <i>predistribution</i> about allowing people to increase production for themselves and others. MMT/ Keynesian policy IS a free lunch, compared to mainstream, compared to balanced budget mania, because it is about not destroying the lunch you already have. <br /><br /><i>The snag of the MMT policy agenda is that it simply shifts taxes into the indefinite future.</i> This is always where they were. It is logically impossible that they be anywhere else. That's the meaning of credit, of money. It's always in the future. That's why Commons discussed creditary theory under the heading of "futurity." <br /><br />To enlarge on a point I made above. The effect of MMT deficit owl policy in practice has been to shrink the length in the future for the taxes, not to increase it, as you may think, relative to the balanced budget deficit-terror policy. Deficit or debt to GDP ratios are in units of years. As they shrank in the postwar era, so did the time from debt issuance to payment. <br /><br />In other words: "Functional finance is sounder than sound finance". EKH balanced budget proposals being a species of sound finance. "Take care of the employment, and the budget will take care of itself."<br /><br />Questions - are you for full employment? Do you have a plan to achieve it? Do you think it is automatic or natural in a monetary economy? (Ha!) Do you think it is achievable with balanced budgets? Why? Which is a more important, morally important goal - what is on your political agenda - numerological obsession with balanced budgets (for obscure reasons) or achieving 100% employment?Calgacushttps://www.blogger.com/profile/06031818010224747000noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-32723298907084518582017-10-02T00:17:27.751-04:002017-10-02T00:17:27.751-04:00(2/2)
Belittling "trivial" ideas and ign...(2/2)<br />Belittling "trivial" ideas and ignoring the slow and careful reasoning they allow leads to intelligent people like you making flatly false, indeed absurd statements like "budget surpluses are needed to pay off earlier deficits." Do you really believe this? It is like insisting that ones proof that heavier-than-air flight is physically impossible is correct, in a world of birds, bees and airplanes. In reality, budget deficits are usually "needed" to repair the damage (across the board, but of course primarily to the poorer) due to budget surpluses or balanced budgets. The normal practical optimum is what was seen in the postwar era - small but mostly continual budget deficits. That's what MMT recommends, that yields the smallest welfare for the rich, social & economic justice to the rest.<br /><br />Your mistakes on profit are two: (a) that MMT disagrees with you about profits. As far as I understand you, it doesn't. MMT is just more concise. (b) That this agreed on conclusion is in some way a BAD THING. A false conclusion that MMT does not leap to. Yes, the household sector can become increasingly in debt (indirectly, via public debt, a bad way to think of things, but I understand you) to the business sector - by their holding of government cash. But what counts is not absolute debt amounts, but their size relative to ability to "pay". <br /><br />What is strange and new is that you even seem to recognize all this when you say: "This can go on for an indefinite time with public debt vis-a-vis the central bank rising continuously and with the business sector’s pile of cash rising continuously and with the number of ponies rising continuously and with price stability. Quite obviously, nobody has any reason to complain." <br /><br />You seem to be taking the MMT position here against your own usual position! With no indication of sarcasm, nor the slightest hint of any error above, rightly, for there isn't any.<br /><br />When MMT policies are implemented, as they basically were worldwide in the postwar era, from 1933 on in the USA, then one gets all those good things you list above for everyone, PLUS rising equality, PLUS declining household sector indebtedness, maybe even the poor old business sector, the 1%ers, seeing a Marxian declining rate of profit. As the $ amount of public debt and the usual deficits went up in the USA & elsewhere, public indebtedness and "the debt burden" went down, when measured the usual way, a very, very rough measure of "ability to pay" (without inflation or anything not cricket) - debt/GDP. This was understood in theory by Evsey Domar & many others before, during and after it happened in practice. So just what reason IS there to complain? I've never seen you say just what it is.<br /><br />Of course MMT can be seen as a profit program for the top 1%ers. It'll make everybody better off. Is it a secret that the top 1% will always have more money, wealth or income than the next 1%, than the next etc down the line? Lake Woebegone, where everybody is above average is supposed to be a joke, not a goal. Are you complaining that MMT doesn't do logically impossible things? Are you complaining that it is not a program to put out only one of your eyes, as long as both of your neighbors eyes are put out?<br /><br />Is it really such a bad world if the richest girl in the world has 11 ponies while the poorest one has only 9? Compared to a world where the richest girl has only 10 ponies, but is taught by her parents to use them to trample down the vast poor and poniless majority every day?Calgacushttps://www.blogger.com/profile/06031818010224747000noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-59789760919856824612017-10-02T00:15:03.499-04:002017-10-02T00:15:03.499-04:00EKH:You quote Wray “money is a cross-balance sheet...EKH:<i>You quote Wray “money is a cross-balance sheet RELATIONSHIP”. Yes, trivially true and known since the Middle Ages, but MMTers are too stupid to do the accounting properly.</i><br /><br />Known since the middle ages? Reference please. <br /><br />The leading medieval contribution was due to Nicole Oresme, a very great thinker who invented graphs, fractional powers and anticipated Poincare's idea of structural stability. He also originated the commodity theory of money, which is mainly wrong; MMT is based on the credit/state theory: Money is a relation, any credit/debt relation, which is treated as a thing, a commodity (which is what Oresme got right). That is what negotiability, transferability means; money is precisely "negotiable credit" (credit commodified) and nothing else. And the usual basic money, the most negotiable, the moniest money, is state money. (Central bank money is one step below state money, if you hurt your brain by distinguishing them by the way - another area where I believe you follow a mainstream error of holding the reverse.)<br /><br />Although it had antecedents of course, the first complete, completely clear and correct & of course "trivial" statements are from Alfred Mitchell-Innes. In the 19th century, Fichte, McLeod, Marx, Knapp etc came very, very close at times as did many predecessors, some medieval, but not quite there, not always right-on-the-nose.<br /><br />Speaking of "trivial" or "trivially true" solely as criticism bespeaks unfamiliarity of mathematical modes of thought. To quote, from memory, Andre Weil, "'trivial' does not mean 'obvious', as all mathematicians know". The truly greatest mathematical or scientific achievements - are trivialities. Which are not obvious until someone thinks them.<br /><br />Computer science in education today plays a similar role to Euclid for millennia - providing intellectual rigor and discipline. If your program doesn't work when you type it in to the mindless computer, if you can't write a two-column proof giving the moronic trivial reason why each step follows from previous ones, your great ideas are not entirely matured. Similar rigor is provided by experiment or practice in science. <br /><br /><i>The obvious mistake of Stephanie Kelton’s op-ed is to confound the two cases of short-term cash deficits and long-term budget deficits.</i><br /><br />Your mistakes are seeing a nonexistent difference between short & long-term here, and caring crazily about deficits, imagining negative effects on no logical basis, which aren't even actually described sufficiently and which are not observed in practice. The government "cash manager" is utterly unnecessary. The central bank is utterly unnecessary. They don't really do anything. Get rid of them. The US has at times. <br /><br />Again, the function of a "government cash manager" is roughly to do the opposite of what you assert. So it is best performed to a very good first approximation by nobody and nothing at all- Wray says "a chimp or a robot". Rather milder on "government cash managers" than Andrew Jackson, who called them "a den of vipers and thieves. I have determined to rout you out, and by the Eternal, I will rout you out!"<br /><br />These errors are due like all errors to not subjecting ones thought to discipline like mathematical proof, the discipline of writing programs that work or of testing theory by experiments. Another mistake is in debating technique - if you want to say MMT is wrong, you have to quote an MMT statement, try to read it as the author meant, and show that it is wrong by logic, leads to a conclusion universally held to be wrong. Quotations and citations are not optional, but necessary to rigorous debate. In short, stop going too fast. Speak to me as if I am an idiot. I do not mind. Festina lente.<br />(1/2)Calgacushttps://www.blogger.com/profile/06031818010224747000noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-41906891147124482712017-10-01T21:58:55.609-04:002017-10-01T21:58:55.609-04:00Why is this Egmont fellow so obsessed with MMT?Why is this Egmont fellow so obsessed with MMT?MRWhttps://www.blogger.com/profile/13878920695841363553noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-731399323702757482017-10-01T18:50:58.564-04:002017-10-01T18:50:58.564-04:00Part 2
In the MMT variant, the wage income receiv...Part 2<br /><br />In the MMT variant, the wage income receivers are now taxed via the price increase. In real terms Ow1=(Yw−T)/P compares to Ow2=Yw/P2. Let us assume for simplicity that both variants lead to the same outcome, i.e. Ow1=Ow2. Hence in real terms, the wage income receivers do not benefit from the tax reduction.<br /><br />The profit of the business sector was zero in the initial period, i.e. Qm=C−Yw=0 because of C=Yw, and is now positive Qm2=C2−Yw=Yt because of C2=Yw+Yt. So, the identical real redistribution creates a profit for the business sector. It always holds Public Deficit = Private Profit.<br /><br />This can go on for an indefinite time with public debt vis-a-vis the central bank rising continuously and with the business sector’s pile of cash rising continuously and with no inflation. As long as the debt is revolved, all is fine. Interest for the public debt is reliably taken from the household sector via taxes and transferred to the bond holding business/banking sector. This is an additional benefit for the one-percenters of the MMT way of doing things.<br /><br />Compared to the redistribution via a balanced budget the same real redistribution via budget deficits has only the optical advantage of T=0 for the wage income recipients yet palatable and long-lasting advantages for the one-percenters in the form of higher profits and subsequent interest incomes.<br /><br />The snag of the MMT policy agenda is that it simply shifts taxes into the indefinite future. Those people who suspect that the MMT economic policy agenda is too good to be true have fine instincts. MMT is not a new economic school with a superior problem-solving capacity. Instead ― intended or unintended does not matter ― scientifically retarded MMTers actually do the PR for the economic policy agenda of the one-percenters.<br /><br />Egmont Kakarot-Handtke<br /><br />#1 For the full-spectrum refutation of MMT see cross-references<br />http://axecorg.blogspot.de/2017/07/mmt-cross-references.html<br /><br />#2 Wikimedia, Pure production-consumption economy<br />https://commons.wikimedia.org/wiki/File:AXEC31.pngAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-24140276092681067592017-10-01T18:48:42.379-04:002017-10-01T18:48:42.379-04:00MMT: Just political heat, no scientific light
Comm...MMT: Just political heat, no scientific light<br />Comment on Stephanie Kelton/Op-Ed on ‘Congress can give every American a pony (if it breeds enough ponies)’<br /><br />The selling proposition of MMT is that the government can solve all economic problems because as sovereign currency issuer it is not financially in any way restricted. In other words, in contradistinction to the private households or firms, the government can run deficits without any risk of going bankrupt. This is true in principle but leads to some unintended consequences which are due to the fact that MMTers do not know how the economy works. In other words MMTers lack the true economic theory. This is rather bad for people who claim to be scientists: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)<br /><br />What the layperson cannot see is that MMT has NO sound scientific foundations. The MMT policy proposals are based on Keynesian macro which has been refuted long ago.#1<br /><br />As the correct analytical starting point, the pure production-consumption economy is defined with this set of macro axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.<br /><br />Under the conditions of market clearing X=O and budget balancing C=Yw the price is given by P=C/X=W/R, i.e. the market clearing price is in the initial period equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand. For the graphical representation see Figure 1.#2<br /><br />Monetary profit for the economy as a whole is defined as Qm≡C−Yw and monetary saving as Sm≡Yw−C. It always holds Qm+Sm=0, in other words, the business sector’s surplus = profit (deficit = loss) equals the household sector’s deficit = dissaving (surplus = saving). This is the most elementary form of the Profit Law. Under the condition of budget balancing, total monetary profit is zero.<br /><br />Now, the sovereign government decides that in the next period wage income is taxed and that a certain number of hitherto unemployed are taken into a Job Guarantee Program. So, net wage income is now Yw−T and the hitherto unemployed receive the transfer income Yt. Total income is Y1=(Yw−T)+Yt and if the government’s budget is balanced, i.e. T=Yt, then total income does not change, it is only redistributed. Under the condition of budget balancing C1=Y1=Y, consumption expenditures remain unchanged and so does the market clearing price P1=C1/X=W/R=P. What changes is the distribution of output O. The real share of wage income receivers is Ow1=(Yw−T)/P and those of Job Guarantee participants is Ot=Yt/P. So, what is achieved with the income redistribution is a proportional output redistribution.<br /><br />MMTers maintain that for the sovereign government there is no need to balance the budget and they propose a tax reduction for the wage income receivers. Under the condition T=0 total income changes from Y1=(Yw-T)+Yt to Y2=Yw+Yt. The amount Yt = government budget deficit comes from the central bank, i.e. is created out of nothing. Under the condition of C2=Y2 consumption expenditures rise with total income. This leads to an increase of the market clearing price P2=C2/X=C2/O. This, in turn, reduces the share of real output for the wage income receivers from Ow=Yw/P in the initial period to Ow2=Yw/P2.<br /><br />See Part 2AXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-58031088887979216982017-10-01T14:29:49.543-04:002017-10-01T14:29:49.543-04:00I don't disagree with you Tom. I just don'...<i>I don't disagree with you Tom. I just don't think that prioritizing full employment is a lefty idea (nor a right-wingy one either, for that matter). And I resist (and resent) putting that label on it. It’s a shackle. And it makes political what should be a societal value.</i><br /><br />Prioritizing actual full employment is different from prioritizing "full employment" and using unemployment as a policy tool.<br /><br />I don't know of any study that compares prioritizing growth, full employment and price stability. <br /><br />Anecdotally from my own experience, those that put full employment at the top are all on the left and those that put either growth or price stability at the top tend to be right.<br /><br />Complicating this is that a lot people that prioritize "jobs" vote right, either because they think that the right supports "job creators," or they prioritize factors other than economics. Also curious is that lot of working people are anti-union.<br /><br />The views and stance of MMT economists are not likely to change, so there's not much value in debating the merits of it.<br /><br />I would actually like to see them cut to the chase and call a spade a spade, addressing "capitalism" as bourgeois economic liberalism as the problem and showing that it cannot be reformed since it is based on rent extraction. It needs to be overhauled.<br />Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-84472092724649973602017-10-01T14:16:17.720-04:002017-10-01T14:16:17.720-04:00I don't disagree with you Tom. I just don'...I don't disagree with you Tom. I just don't think that prioritizing full employment is a lefty idea (nor a right-wingy one either, for that matter). And I resist (and resent) putting that label on it. It’s a shackle. And it makes political what should be a societal value.<br /><br />You can call me Horatio Algerish, but where Warren Mosler sold me was the concept of public purpose. I had already been sold in November 1994 after watching Sir James Goldsmith’s riveting and extraordinarily prescient interview with Charlie Rose (still on youtube and still highly relevant) on the purpose of the economy. It was to serve society and “not financial indices.”<br /><br />A billionaire who made a lot of sense and who was fighting what Clinton’s minions—namely the odious Rahm Emanuel—were doing pushing through GATT then in South America on a ‘fast track’.<br /><br />_______________________________________<br />OK. Here’s the Goldsmith interview. Just watch the opening 8-10 minutes if all any of you have the time for. Worth sitting through the middle 15 minutes with Clinton’s boring economic council head making arguments that turned out to be so wrong years later. So were Charlie Rose’s assumptions that GATT would <b>open China’s markets to buy US imports</b>. Ha! The arrogance. The latter portion on his colorful personal life is a hoot. <br />https://www.youtube.com/watch?v=wwmOkaKh3-sMRWhttps://www.blogger.com/profile/13878920695841363553noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-87827644829878665962017-10-01T13:40:40.177-04:002017-10-01T13:40:40.177-04:00@ MRW
As you point out, MMT's operational des...@ MRW<br /><br />As you point out, MMT's operational description is independent of ideology.<br /><br />Scientific theory should be.<br /><br />Macroeconomics is not science but a policy "science" owing to the role of government, so ideology, politics, law, etc. are necessarily involved and those are normative as well as positive. There is no way around this other than by pretending.<br /><br />This is the problem with conventional macro as a "science." it is a pretense based on the assumption that there is no such thing as society, only individuals and aggregations. This ignores the obvious fact that an economy is embedded in a social system in which the relationship of elements, subsystems and system as a whole is as important as the elements (individual agents), if not more important. <br /><br />Ignoring this is just pretend economics that ends up being junk economics (Michael Hudson).<br /><br />As a macro theory and policy science, MMT is Marxian, institutionalist, Keynesian/Post Keynesian in terms of the influence it draws upon and it is also a unique approach that claims to resolve the trifecta of optimal growth, actually full employment, and moderate inflation. As such, it is ideologically on the left. All MMT economists that I am aware of anyway are "leftists" in that they prioritize full employment.<br /><br />Everyone should adopt the MMT operational analysis to the degree it is correct. There's almost nothing that can't be improved upon.<br /><br />Then there could be actual debate about real issues — how to allocate real resources in the present and prepare for the future — instead of the ignorance, persuasion, pretense, etc, that presently exists in macroeconomics, policy studies, and politics. There could also be honest debate also instead of the posturing and misrepresentation that goes on now, while in the background lobbyists write the policy and pay to have it passed.<br /><br />Different views on the left could then compete on the battlefield of ideas, while different schools of thought could compete with each other on both left and right. Now it is basically all BS. Yes, even Bernie, who is apparently also clueless, even though he had "MMT rockstar" Stephanie Kelton advising him. <br /><br />That's OK to a degree in Bernie's case since it turned Stephanie into a superstar and got a lot of free publicity for MMT.<br /><br />Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-42253491995128544382017-10-01T13:18:39.327-04:002017-10-01T13:18:39.327-04:00Let's play nice.Let's play nice.<br />Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-71009146748437075962017-10-01T13:01:55.374-04:002017-10-01T13:01:55.374-04:00OH! I see Mr. Roche is baaaaack.OH! I see Mr. Roche is <i>baaaaack</i>.MRWhttps://www.blogger.com/profile/13878920695841363553noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-11836215288087608802017-10-01T13:01:16.591-04:002017-10-01T13:01:16.591-04:00re: Tom at October 1, 2017 at 9:27 AM
I think MMT...re: Tom at October 1, 2017 at 9:27 AM<br /><br />I think MMT is crazy to identify with any politics, and esp. the ‘progressive’ persuasion.<br /><br />The <b><i>very</i></b> smart thing, IMO, that Warren always ALWAYS did from the beginning was to specify that what you did with MMT operational and transactional truths would vary “depending on your politics.”<br /><br />(Don’t forget, Warren ran as a Tea Partier, an Independent, and a Democrat.)<br /><br />MMT should appeal to Glenn Beck and all conservative Republicans with just as much respect as it appeals to the choir they now preach to on neweconomicperspectives, which is why I can’t stomach going to that site anymore.<br /><br />I think tying MMT principles to any political school of thought is fucking suicide. Not to mention boring.<br /><br />MMT is <b>absolutely ripe</b> for Trumpers to believe in and take up the cause for. Because it can skewer just the group that has caused this group the economic pain Democrats refused to take seriously and that the majority Republican leadership (McConnell, Ryan) didn’t take responsibility for causing in the first place: CONGRESS.<br /><br />So what do MMT proponents mewl about instead? Fucking progressive politics or climate change. Or take pride in themselves in being Trump-haters like Hillary ‘Norma Desmond’ Clinton or that Roche guy who shows up here periodically to defend his reputation (like we care, he has his own website to use for that).<br /><br />MMT info should be on Fox News every night, but the poobahs that could pull this off don’t see that.MRWhttps://www.blogger.com/profile/13878920695841363553noreply@blogger.com